Offshore Wind Market and Economic Analysis Report 2013 · 2013-12-13 · Offshore Wind Market and...
Transcript of Offshore Wind Market and Economic Analysis Report 2013 · 2013-12-13 · Offshore Wind Market and...
Offshore Wind Market and Economic
Analysis
Annual Market Assessment
Prepared for:
U.S. Department of Energy
Client Contact Michael Hahn, Patrick Gilman
Award Number DE-EE0005360
Navigant Consulting, Inc.
77 Bedford Street
Suite 400
Burlington, MA 01803-5154
781.270.8314
www.navigant.com
October 17, 2013
Offshore Wind Market and Economic Analysis Page ii Document Number DE-EE0005360
U.S. Offshore Wind Market and Economic Analysis
Annual Market Assessment
Document Number DE-EE0005360
Prepared for: U.S. Department of Energy
Michael Hahn
Patrick Gilman
Prepared by: Navigant Consulting, Inc.
Bruce Hamilton, Principal Investigator
Lindsay Battenberg
Mark Bielecki
Charlie Bloch
Terese Decker
Lisa Frantzis
Jay Paidipati
Andy Wickless
Feng Zhao
Bruce
Navigant Consortium Member Organizations Key Contributors
American Wind Energy Association Jeff Anthony and Chris Long
Great Lakes Wind Collaborative Victoria Pebbles
Green Giraffe Energy Bankers Marie de Graaf, Jérôme Guillet, and Niels
Jongste
National Renewable Energy Laboratory Eric Lantz and Aaron Smith
Ocean & Coastal Consultants (a COWI company) Brent D. Cooper, P.E., Joe Marrone, P.E., and
Stanley M. White, P.E., D.PE, D.CE
Tetra Tech EC, Inc. Michael D. Ernst, Esq.
Offshore Wind Market and Economic Analysis Page iii Document Number DE-EE0005360
Notice and Disclaimer
This report was prepared by Navigant Consulting, Inc. for the exclusive use of the U.S. Department of
Energy—who supported this effort under Award Number DE-EE0005360. The work presented in this
report represents our best efforts and judgments based on the information available at the time this
report was prepared. Navigant Consulting, Inc. is not responsible for the reader’s use of, or reliance
upon, the report, nor any decisions based on the report. NAVIGANT CONSULTING, INC. MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED. Readers of the report are advised
that they assume all liabilities incurred by them, or third parties, as a result of their reliance on the
report, or the data, information, findings and opinions contained in the report.
Neither the United States Government nor any agency thereof, nor any of their employees, makes any
warranty, express or implied, or assumes any legal liability or responsibility for the accuracy,
completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents
that its use would not infringe privately owned rights. Reference herein to any specific commercial
product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily
constitute or imply its endorsement, recommendation, or favoring by the United States government or
any agency thereof.
This report is being disseminated by the Department of Energy. As such, the document was prepared in
compliance with Section 515 of the Treasury and General Government Appropriations Act for Fiscal
Year 2001 (Public Law 106-554) and information quality guidelines issued by the Department of Energy.
Though this report does not constitute “influential” information, as that term is defined in DOE’s
information quality guidelines or the Office of Management and Budget's Information Quality Bulletin
for Peer Review (Bulletin), the study was reviewed both internally and externally prior to publication.
For purposes of external review, the study benefited from the advice and comments of a panel of
offshore wind industry stakeholders. That panel included representatives from private corporations,
national laboratories, and universities.
Offshore Wind Market and Economic Analysis Page iv Document Number DE-EE0005360
Acknowledgments
For their support of this report, the authors thank the entire U.S. Department of Energy (DOE) Wind &
Water Power Technologies Office, particularly Patrick Gilman and Michael Hahn.
Navigant would also like to thank the following for their contributions to this report:
Arnold Boezaart GVSU / Michigan Alternative and Renewable Energy Center
Guy Chapman Dominion
Ben Chicoski Energetics Incorporated
Sebastian Chivers PMSS
Fara Courtney U.S. Offshore Wind Collaborative
Steve Dever LEEDCo
Tim Downey Saint Lawrence Seaway Development Corporation (US DOT)
Patrick Fullenkamp Global Wind Network
Tom Graf Michigan DEQ
Lynn Gresock ARCADIS
Jeffrey Grybowski Deepwater Wind
Jeff Hammond Ecology and Environment, Inc.
John Hingtgen California Energy Commission
William Hurley The Glosten Associates, Inc.
Willett Kempton University of Delaware
Ben Maples NREL
Dennis Nielson DOSECC Exploration Services
Brian O'Hara Southeastern Coastal Wind Coalition
Doug Pfeister Offshore Wind Development Coalition
Eric Ritter LEEDCo
Jacques Roeth NYSERDA
Bob Schubert Siemens Energy Inc
Peter D. Stoklossa ThyssenKrupp Rothe Erde GmbH
Katarina Svabcikova Siemens Energy
Larry Viterna Nautica Windpower LLC
Carl Wegener Signal International, Inc.
Cliff Williams Orisol Energy
Greg Williams Bracewell & Guiliani, LLP
Paul Williamson Maine Wind Industry Initiative
Andy Zalay windfarm inc
Offshore Wind Market and Economic Analysis Page v Document Number DE-EE0005360
Table of Contents
Executive Summary ............................................................................................................... xiii
Section 1. Global Offshore Wind Development Trends ........................................................................ xiii Section 2. Analysis of Policy Developments ........................................................................................... xvi Section 3. Economic Impacts .................................................................................................................... xvii Section 4. Developments in Relevant Sectors of the Economy ............................................................ xvii
1. Global Offshore Wind Development Trends ............................................................. 1
1.1 Global Offshore Wind Development ................................................................................................ 3 1.2 U.S. Project Development Overview ................................................................................................ 5
1.2.1 Forecast Capacity and Completion Dates ......................................................................... 9 1.2.2 Notable Developments in Advanced-Stage Projects........................................................ 9 1.2.3 U.S. DOE Advanced Technology Demonstration Projects ............................................ 13
1.3 Capital Cost Trends .......................................................................................................................... 17 1.4 Market Segmentation and Technology Trends ............................................................................. 19
1.4.1 Depth and Distance from Shore ........................................................................................ 19 1.4.2 Plant Characteristics ........................................................................................................... 22 1.4.3 Turbine Trends .................................................................................................................... 23 1.4.4 Support Structure Trends .................................................................................................. 31 1.4.5 Electrical Infrastructure Trends ........................................................................................ 36 1.4.6 Logistical and Vessel Trends ............................................................................................. 39 1.4.7 Operations and Maintenance Trends ............................................................................... 43
1.5 Financing Trends ............................................................................................................................... 44 1.5.1 Rising Capital Requirements ............................................................................................. 44 1.5.2 Utility On-balance Sheet Financing .................................................................................. 44 1.5.3 Project Finance .................................................................................................................... 44 1.5.4 Multiparty Financing.......................................................................................................... 45 1.5.5 Importance of Government Financial Institutions ......................................................... 46 1.5.6 New Financing Sources ...................................................................................................... 46 1.5.7 Likely Financing Trends for Offshore Wind in the United States ................................ 47 1.5.8 Cape Wind Financing ......................................................................................................... 47
2. Analysis of Policy Developments ................................................................................ 48
2.1 Offshore Wind Program Objectives ................................................................................................ 49 2.2 Potential Barriers to Meeting the Objectives ................................................................................. 50 2.3 Examples of Policies for Addressing the Cost Competitiveness of Offshore Wind Energy ... 50
2.3.1 General Discussion of Policy Examples ........................................................................... 50 2.3.2 Current U.S. and State Policies.......................................................................................... 51 2.3.3 Current Policies in Europe ................................................................................................. 60
2.4 Examples of Policies for Addressing Infrastructure Challenges ................................................ 67
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2.4.1 General Discussion of Policy Examples ........................................................................... 67 2.4.2 Current U.S. and State Policies.......................................................................................... 72 2.4.3 Current Policies in Europe ................................................................................................. 73
2.5 Policies That Address Regulatory Challenges .............................................................................. 74 2.5.1 General Discussion of Policy Examples ........................................................................... 74 2.5.2 Current U.S. and State Policies.......................................................................................... 76 2.5.3 Current Policies in Europe ................................................................................................. 80
2.6 Summary ............................................................................................................................................ 81
3. Economic Impacts ........................................................................................................... 83
3.1 Summary ............................................................................................................................................ 83 3.2 Scope of Update................................................................................................................................. 83 3.3 Baseline Data Collection ................................................................................................................... 84
3.3.1 Online Survey ...................................................................................................................... 84 3.3.2 Phone Survey ....................................................................................................................... 85 3.3.3 JEDI Estimates ..................................................................................................................... 85
3.4 Results ................................................................................................................................................. 85
4. Developments in Relevant Sectors of the Economy ................................................ 87
4.1 Introduction ....................................................................................................................................... 87 4.2 Power Sector ...................................................................................................................................... 88
4.2.1 Change in Overall Demand for Electricity ...................................................................... 88 4.2.2 Change in the Country’s Nuclear Power Generation Capacity.................................... 89 4.2.3 Change in Natural Gas Prices ........................................................................................... 90 4.2.4 Change in the Country’s Coal-Based Generation Capacity .......................................... 91
4.3 Oil and Gas ......................................................................................................................................... 92 4.3.1 Change in Level of Offshore Oil and Gas Development ............................................... 92
4.4 Construction ...................................................................................................................................... 92 4.4.1 Change in Level of Construction Activity Using Similar Types of Equipment and/or
Raw Materials as Offshore Wind ...................................................................................... 92 4.5 Manufacturing ................................................................................................................................... 93
4.5.1 Change in Manufacturing of Products That Utilize Similar Types of Raw Materials
as Offshore Wind ................................................................................................................ 93 4.6 Telecommunications ......................................................................................................................... 94
4.6.1 Change in Demand for Subsea Cable-Laying Vessels ................................................... 94 4.7 Financial ............................................................................................................................................. 95
4.7.1 Change in the Cost of Capital ........................................................................................... 95
5. Conclusion ........................................................................................................................ 96
References .................................................................................................................................. 97
Appendix A. Potential Barriers to Offshore Wind Development in the U.S. ...... 101
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A.1 Cost-Competitiveness of Offshore Wind Energy ....................................................................... 101 A.2 Infrastructure Challenges ............................................................................................................... 101 A.3 Regulatory Challenges ................................................................................................................... 102
Appendix B. Offshore Wind Policies in Selected U.S. States ................................. 104
B.1 California .......................................................................................................................................... 104 B.2 Delaware........................................................................................................................................... 104 B.3 Illinois ............................................................................................................................................... 105 B.4 Maine ................................................................................................................................................ 106 B.5 Maryland .......................................................................................................................................... 106 B.6 Massachusetts .................................................................................................................................. 107 B.7 Michigan ........................................................................................................................................... 108 B.8 New Jersey ....................................................................................................................................... 109 B.9 New York ......................................................................................................................................... 110 B.10 Ohio ................................................................................................................................................... 111 B.11 Rhode Island .................................................................................................................................... 111 B.12 Texas ................................................................................................................................................. 112 B.13 Virginia ............................................................................................................................................. 112
Appendix C. Offshore Wind Policies in Selected European Countries ................ 114
C.1 Denmark ........................................................................................................................................... 114 C.2 Germany ........................................................................................................................................... 116 C.3 The Netherlands .............................................................................................................................. 119 C.4 United Kingdom .............................................................................................................................. 122
Offshore Wind Market and Economic Analysis Page viii Document Number DE-EE0005360
List of Figures
Figure ES-1. Proposed U.S. Offshore Wind Energy Projects in Advanced Development Stages by
Jurisdiction and Project Size ...................................................................................................................................... Figure 1-1. Historical Growth of the Global Offshore Wind Market ................................................................. 3 Figure 1-2. Proposed U.S. Offshore Wind Energy Projects in Advanced Development Stages by
Jurisdiction and Project Size ...................................................................................................................................... Figure 1-3. Growth Trajectory for U.S. Offshore Wind Based on Forecast Construction Dates .................... 9 Figure 1-4. Map of BOEM Atlantic Wind Energy Areas ................................................................................... 11 Figure 1-5. Reported Capital Cost Trends for Global Offshore Wind Projects over Time ........................... 17 Figure 1-6. Offshore Wind Plant Capital Cost Breakdown ............................................................................... 18 Figure 1-7. Offshore Wind Plant Capital Cost Breakdown (without Construction Financing) ................... 19 Figure 1-8. Average Distance from Shore for Offshore Wind Projects over Time ......................................... 20 Figure 1-9. Depth and Distance from Shore for Global Offshore Wind Farms .............................................. 21 Figure 1-10. Global Offshore Wind Plant Capacities over Time ...................................................................... 22 Figure 1-11. Reported Capacity Factors for Global Offshore Wind Plants over Time .................................. 23 Figure 1-12. Average Turbine Size for Historic Global and Planned U.S. Offshore Wind Farms ............... 24 Figure 1-13. Global Offshore Wind Plant Hub Heights over Time ................................................................. 26 Figure 1-14. Global Offshore Wind Plant Rotor Diameter over Time ............................................................. 27 Figure 1-15. Share of Cumulative Installed Offshore Wind Capacity by Drive Train Configuration
(through 2012) ......................................................................................................................................................... 28 Figure 1-16. Offshore Wind Turbine Prototypes by Drivetrain Configuration and Year of First Offshore
Deployment ............................................................................................................................................................. 31 Figure 1-17. Substructure Types for Completed Offshore Wind Projects (through 2012) ............................ 32 Figure 1-18. Substructure Types for Completed Offshore Wind Projects by Year Installed ........................ 33 Figure 1-19. Array and Export Voltages for Offshore Wind Projects .............................................................. 38 Figure 2-1. Summary of Policies to Address Cost Competitiveness in Selected U.S. States ........................ 53 Figure 2-2. Site Selection and Leasing Policies in U.S. States ........................................................................... 77 Figure 3-1. Annual U.S. Employment Supported by the U.S. Offshore Wind Industry, 2012 Projection .. 83 Figure 3-2. Annual U.S. Economic Activity Supported by the U.S. Offshore Wind Industry, 2012
Projection ................................................................................................................................................................. 84 Figure 4-1. U.S. Retail Electricity Sales: 2002-2012 (million kWh) ................................................................... 89 Figure 4-2. U.S. Power Generation Capacity Additions by Fuel Type ............................................................ 90 Figure 4-3. Henry Hub Gulf Coast Natural Gas Spot Price 2007-2013 ............................................................ 91 Figure 4-4. Producer Price Index for Selected Commodities (2003-2012) ....................................................... 93 Figure 4-5. Rare Earth Criticality Matrices .......................................................................................................... 94 Figure 4-6. Federal Funds Effective Rate (%): January 2000 – July 2013 ......................................................... 95
Offshore Wind Market and Economic Analysis Page ix Document Number DE-EE0005360
List of Tables
Table 1-1. Summary of Installed Global Offshore Capacity through 2012 ....................................................... 4 Table 1-2. Summary of Advanced-Stage U.S. Projects ........................................................................................ 7 Table 1-3. Segmentation of Wind Turbine Drivetrain Architectures ............................................................... 30 Table 1-4. Selected Offshore Wind Foundation Designs under Development .............................................. 35 Table 1-5. Vessel Types Required for Each Offshore Wind Project Phase ...................................................... 40 Table 1-6. Availability of Different Vessel Types with Track Record of Serving the Offshore Wind
Industry by Region (Based on Vessel Flag) as of 2013 (In-operation only) .................................................... 41 Table 2-1. Key Offshore Wind Barriers ................................................................................................................ 50 Table 2-2. Policies to Address Cost Competitiveness of Offshore Wind in Selected U.S. States ................. 54 Table 2-3. Renewable Energy Investment Support Schemes in Europe ......................................................... 60 Table 2-4. Offshore Wind Capacity Installed Under Support Schemes Used in Europe .............................. 63 Table 2-5. State-based Wind-focused Transmission Policies ............................................................................ 72 Table 2-6. Policies for Addressing Infrastructure Challenges in Europe ........................................................ 73 Table 2-7. Policies that Address Regulatory Challenges in Europe ................................................................. 80 Table 2-8. Offshore Wind Policy Examples and Developments ...................................................................... 81 Table 3-1. Estimated Employment and Investment in the U.S. Offshore Wind Industry ............................ 86 Table 4-1. Factors That Impact Offshore Wind ................................................................................................... 88
Offshore Wind Market and Economic Analysis Page x Document Number DE-EE0005360
Abbreviations
AC alternating current
ATD Advanced Technology Demonstration
AWC Atlantic Wind Connection
AWEA American Wind Energy Association
BOEM Bureau of Ocean Energy Management
BPU Board of Public Utilities
BTMU Bank of Tokyo-Mitsubishi UFJ (Japan)
CAISO California Independent System Operator
CBM condition-based maintenance
CEQ Council on Environmental Quality
CfD Contracts for Difference
COP Construction and Operations Plan
CREZ competitive renewable energy zone
CZMA Coastal Zone Management Act
DC direct current
DD Direct Drive
DEA Danish Energy Agency
DECC Department of Energy and Climate Change
(U.K.)
DNR Department of Natural Resources
DOE Department of Energy
EA environmental assessment
EERE Energy Efficiency & Renewable Energy
EEZ Exclusive Economic Zone (DK)
EIS environmental impact statement
EnWG New German Energy Act
EPA Environmental Protection Agency
EPAct Energy Policy Act of 2005 (U.S.)
ETI Energy Technologies Institute
EU European Union
EWEA European Wind Energy Association
FEPA Food and Environment Protection Act 1985
(U.K.)
FERC Federal Energy Regulatory Commission
FiT Feed-in Tariff
FONSI Finding of No Significant Impacts
FTE full-time equivalent
GBS gravity-based structure
GDP gross domestic product
GE General Electric
GIB Green Investment Bank (U.K.)
GLOW Great Lakes Wind
GLWC Great Lakes Wind Collaborative
GW gigawatt
GWEC Global Wind Energy Council
HVAC high-voltage alternating current
HVDC high-voltage direct current
IAPEME International Advisory Panel of Experts on
Marine Ecology
IOU investor-owned utility
IPP independent power producer
ISO independent system operator
ITC investment tax credit
JEDI Jobs & Economic Development Impact
kcmil thousand circular mils
kV kilovolt
kW kilowatt
LCOE levelized cost of energy
LEEDCo Lake Erie Energy Development Corporation
LIPA Long Island Power Authority
LNG liquefied natural gas
METI Ministry of Economy, Trade and Industry
(Japan)
MISO Midcontinent Independent System Operator
mmBTU million British thermal units
MMS Minerals Management Service
MOU Memorandum of Understanding
MW megawatt
MWh megawatt-hours
NEPA National Environmental Policy Act
NIP National Infrastructure Plan
NOAA National Oceanic and Atmospheric
Administration
NPS National Policy Statement (U.K.)
NREL National Renewable Energy Laboratory
NYPA New York Power Authority
O&M operations and maintenance
OCS Outer Continental Shelf
OEM original equipment manufacturer
Ofgem Office of the Gas and Electricity Markets
(U.K.)
OFTO offshore transmission owner
OREC offshore wind renewable energy credit
OTB Offshore Terminal Bremerhaven
OWEDA Offshore Wind Economic Development Act
PEA programmatic EA
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PEIS programmatic EIS
PMDD permanent magnetic direct drive
PMG permanent magnetic generator
POU publicly owned utility
PPA power purchase agreement
PSC Public Service Commission
PTC production tax credit
PUC Public Utilities Commission
R&D research and development
REC Renewable Energy Credit
RFP request for proposal
RO Renewable Obligation
ROC Renewable Obligation Certificate
RPS renewable portfolio standard
RTO regional transmission organization
SAP site assessment plan
SCADA supervisory control and data acquisition
SEA Strategic Environmental Assessment (U.K.)
TCE The Crown Estate
TSO transmission system operator
UMaine University of Maine
USACE U.S. Army Corps of Engineers
USFWS U.S. Fish and Wildlife Service
WAB Wind Agency Bremerhaven
WEA Wind Energy Area
WRA wind resource area
Offshore Wind Market and Economic Analysis Page xii Document Number DE-EE0005360
Introduction
This report was produced on behalf of the Wind and Water Power Technologies Office within the U.S.
Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy (EERE) as an award
resulting from Funding Opportunity Announcement DE-FOA-0000414, entitled U.S. Offshore Wind:
Removing Market Barriers; Topic Area 1: Offshore Wind Market and Economic Analysis.
The objective of this report is to provide a comprehensive annual assessment of the U.S. offshore wind
market. The report will be updated and published annually for a three-year period. The report was first
published in early 2013 covering research performed in 2012. This 2nd annual report focuses on new
developments that have occurred in 2013. The report will provide stakeholders with a reliable and
consistent data source addressing entry barriers and U.S. competitiveness in the offshore wind market.
The report was produced by the Navigant Consortium, led by Navigant Consulting, Inc. (“Navigant”).
Additional members of the Navigant Consortium include the American Wind Energy Association
(AWEA), the Great Lakes Wind Collaborative (GLWC), Green Giraffe Energy Bankers, National
Renewable Energy Laboratory (NREL), Ocean & Coastal Consultants (a COWI company), and Tetra
Tech EC, Inc.
Offshore Wind Market and Economic Analysis Page xiii Document Number DE-EE0005360
Executive Summary
The U.S. offshore wind industry is transitioning from early development to demonstration of
commercial viability. While there are no commercial-scale projects in operation or in the construction
phase, there are eleven U.S. projects in advanced development, defined as having either been awarded a
lease, conducted baseline or geophysical studies, or obtained a power purchase agreement (PPA). There
are panels or task forces in place in at least 13 states to engage stakeholders to identify constraints and
sites for offshore wind. U.S. policymakers are beginning to follow the examples in Europe that have
proven successful in stimulating offshore wind technological advancement, project deployment, and job
creation.
This report is the second annual assessment of the U.S. offshore wind market. It includes the following
major sections:
» Section 1: key data on developments in the offshore wind technology sector and the global
development of offshore wind projects, with a particular focus on progress in the United States
» Section 2: analysis of policy developments at the federal and state levels that have been effective
in advancing offshore wind deployment in the United States
» Section 3: analysis of actual and projected economic impact, including regional development and
job creation
» Section 4: analysis of developments in relevant sectors of the economy with the potential to affect
offshore wind deployment in the United States
Section 1. Global Offshore Wind Development Trends
There are approximately 5.3 gigawatts (GW) of offshore wind installations worldwide. The majority of
this activity continues to center on northwestern Europe, but development in China continues to
progress. In 2012, more than 1,100 megawatts (MW) of wind power capacity was added globally, with
the United Kingdom alone accounting for 756 MW of new capacity. The European market will continue
to grow rapidly over the next two years, with new and expanding projects likely to contribute a record-
setting 2,900 MW in 2013 alone (mostly in Germany and the United Kingdom).
Offshore Wind Market and Economic Analysis Page xiv Document Number DE-EE0005360
Since the last edition of this report, several potential U.S. offshore wind projects have achieved
notable advancements in their development processes. In addition to two Bureau of Ocean Energy
Management (BOEM) commercial lease auctions for federal Wind Energy Areas (WEAs), other later-
stage commercial-scale projects have made incremental progress toward starting construction. Eleven
U.S. projects, representing 3,824 MW, now lie in advanced stages of development.1 . A map showing the
announced locations and capacities of these advanced-stage projects appears in Figure ES-1.
Note: One potential project (the Deepwater Wind Energy Center) spans federal waters off the coasts of
Massachusetts and Rhode Island; this map splits its estimated 1,000-MW capacity between the two states.
Source: Navigant analysis
1 In this report, “advanced stage” includes projects that have accomplished at least one of the following three
milestones: received approval for an interim limited lease or a commercial lease in state or federal waters; conducted
baseline or geophysical studies at the proposed site with a meteorological tower erected and collecting data,
boreholes drilled, or geological and geophysical data acquisition system in use; or signed a power purchase
agreement (PPA) with a power off-taker. Note that each of these criteria represents a requisite step that a project will
take before it gains final approvals and reaches the construction phase. Simply having achieved one of these
milestones, however, does not guarantee that a project will ultimately move forward, and any two projects
qualifying as “advanced” may have made different levels of progress relative to one another.
Figure ES-1. Proposed U.S. Offshore Wind Energy Projects in Advanced Development Stages by
Jurisdiction and Project Size
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On the demonstration-project front, the University of Maine, in partnership with the U.S.
Department of Energy (DOE), installed the United States’ first offshore wind turbine: a 1/8-scale pilot
turbine on a floating foundation. In addition, DOE awarded Advanced Technology Demonstration
(ATD) project grants in December 2012. The grants are intended to help address ongoing challenges and
cost barriers to offshore wind energy. The DOE will select up to three of these projects to receive
additional funding to help carry the projects through final design, fabrication, and installation.
Offshore wind power prices have generally increased over time. For projects installed in 2012 (for
which data was available), the average reported capital cost was $5,384/kW. These cost increases are a
function of several factors (e.g., a movement toward deeper-water sites and increased siting complexity);
however, potential technological advancements aim to help slow and eventually reverse the trend. In
addition to advancements in equipment and installation approaches, improved capacity factors may
help further mitigate increased capital costs through better energy capture and conversion.
The average nameplate capacity of offshore wind turbines installed globally each year has grown
from 2.9 MW in 2007 to 4.1 MW in 2012. This trend toward larger turbines will likely continue, driven
by advancements in materials, design, processes, and logistics, which allow larger components to be
built with lower system costs. The average turbine size for advanced-stage, planned projects in the
United States, however, is expected to range between 4 and 5 MW, indicating that the United States is
largely planning to utilize larger offshore turbines rather than smaller turbines that have previously been
installed in European waters.
Globally, offshore wind projects continue to trend further from shore into increasingly deeper
waters; parallel increases in turbine sizes and hub heights are contributing to higher reported
capacity factors. While the trend toward greater distances helps reduce visual impacts and public
opposition to offshore wind, it also requires advancements in foundation technologies and affects the
logistics and costs of installation and maintenance. On the positive side, the trend toward higher-
capacity machines combines with increasing hub heights and rotor diameters to allow projects to
improve energy capture by taking better advantage of higher wind speeds.
Approaches to drivetrain configurations continue to diversify in an effort to improve reliability and
reduce exposure to volatile supplies of the rare earth metals required for direct drive generators. The
high costs of addressing past turbine equipment failures in an offshore setting have encouraged
manufacturers and developers to continue seeking more robust drivetrain configurations. However,
recent interest in direct-drive turbines has been somewhat tempered by limited supply and price
volatility for several rare earth metals. As a result, several prototypes of machines employing alternate
drivetrain designs are expected to be tested in the next two to three years.
The general trend toward diversification of substructure types also continued in 2012 and 2013, as the
industry seeks to address deeper waters, varying seabed conditions, increasing turbines sizes, and the
increased severity of wind and wave loading at offshore wind projects. However, alternatives to the
monopile and gravity-based approaches have only seen limited deployment since 2009, with a total of
350 units installed through the end of 2012 (out of an overall 1,725 units globally). To date, only two full-
scale prototype floating foundations have been installed globally.
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Few new developments have occurred with regard to vessels, logistics, and the operations and
maintenance (O&M) of offshore wind farms since the previous edition of this report. In general,
increased turbine size, plant size, and distance from shore all have direct consequences on vessel
requirements and availability, as well as on O&M practices. These trends will add to the logistical
difficulties of maintaining offshore turbines, particularly as longer distances from shore increase the
challenges in accessing turbines due to weather conditions. The relatively slow ramp-up of the U.S.
market will likely provide developers ample opportunity to respond to shifting vessel and O&M needs.
Section 2. Analysis of Policy Developments
U.S. offshore wind development faces significant challenges: (1) the cost competitiveness of offshore
wind energy;2 (2) a lack of infrastructure such as offshore transmission and purpose-built ports and
vessels; and (3) uncertain and lengthy regulatory processes. Various U.S. states, the U.S. federal
government, and European countries have used a variety of policies to address each of these barriers
with varying success.
For the U.S. to maximize offshore wind development, the most critical need continues to be
stimulation of demand through addressing cost competitiveness. In 2013, this critical need was
partially addressed through an extension of the U.S. Renewable Electricity Production Tax Credit (PTC),
the Business Energy Investment Tax Credit (ITC), and the 50 percent first-year bonus depreciation
allowance. In addition, the U.S. DOE announced seven projects that will receive up to $4 million each to
complete engineering and planning as the first phase of the Offshore Wind Advanced Technology
Demonstration Program. On the state level, the Maryland Offshore Wind Energy Act of 2013 established
Offshore Wind Renewable Energy Credits for up to 200 MW, requiring consideration of peak load price
suppression and limiting rate impacts.
Increased infrastructure is necessary to allow demand to be filled. Examples of transmission policies
that can be implemented in the short term with relatively little effort are to designate offshore wind
energy resources zones for targeted offshore grid investments, establish cost allocation and recovery
mechanisms for transmission interconnections, and promote utilization of existing transmission capacity
reservations to integrate offshore wind. In 2013, there were few tangible milestones in this area,
although long-term plans for offshore transmission projects such as the Atlantic Wind Connection and
the New Jersey Energy Link progressed steadily in their development efforts.
Regulatory policies cover three general categories: (a) policies that define the process of obtaining site
leases; (b) policies that define the environmental, permitting processes; and (c) policies that regulate
environmental and safety compliance of plants in operation. In 2013, BOEM held the first two
competitive lease sales for renewable energy in U.S. federal waters off the shores of Rhode Island and
2 The first two contracts for U.S. offshore wind reflect the higher costs by being priced at $187/MWh plus 3.5%
annual escalation for Cape Wind and $244/MWh plus 3.5% annual escalation for the Deepwater Wind Block Island
Wind Farm.
Offshore Wind Market and Economic Analysis Page xvii Document Number DE-EE0005360
Virginia. On the state level, Illinois passed the Lake Michigan Wind Energy Act, which requires the
Illinois DNR to develop a detailed offshore wind energy siting matrix for Lake Michigan.
Section 3. Economic Impacts
Current employment levels could be between 150 and 590 full-time equivalents (FTEs), and current
investment could be between $21 million and $159 million. The ranges are driven by Navigant’s
uncertainty about from where advanced-stage projects are sourcing components. As the advanced-stage
projects start construction, employment levels will likely double or triple to support equipment transport
and installation.
Section 4. Developments in Relevant Sectors of the Economy
The development of an offshore wind industry in the U.S. will depend on the evolution of other
sectors in the economy. Factors within the power sector, such as the capacity or price of competing
power generation technologies, will affect the demand for offshore wind. Factors within industries that
compete with offshore wind for resources (e.g., oil and gas, construction, and manufacturing) will affect
the price of offshore wind power.
Factors in the power sector that will have the largest impact include natural gas prices and the change
in coal-based generation capacity. As electricity prices have historically been linked to natural gas
prices, a decrease in prices of the latter can lead to a decrease in the price of the former. Natural gas
prices declined from above $4 per million British thermal units (MMBtu) in August 2011 to below
$2/MMbtu in April 2012, largely due to the supply of low-cost gas from the Marcellus Shale. Lower
resulting electricity prices can make investment in other power generation sources such as offshore wind
less economically attractive. However, natural gas prices have been rising steadily since then to
$3.72/MMbtu in October 20133 and may continue to rise with three new liquefied natural gas plants
recently approved.
In terms of coal, Navigant analysis reveals executed and planned coal plant retirements through 2017
that exceed 37 GW. As this capacity is removed from the U.S. electric generation base, it will need to be
replaced by other power generation resources, including but not limited to natural gas and offshore
wind. As such, continued coal plant retirements could increase the demand for offshore wind plants in
the United States.
3 U.S. Energy Information Administration Daily Energy Prices, October 16, 2013
(http://www.eia.gov/todayinenergy/prices.cfm).
Offshore Wind Market and Economic Analysis Page 1 Document Number DE-EE0005360
1. Global Offshore Wind Development Trends
Since last year’s report, additional progress has been made to develop commercial and demonstration-
scale projects in U.S. waters, including the installation of the nation’s first pilot-scale, offshore wind
turbine. The University of Maine’s 20-kilowatt (kW) turbine, resting atop a prototype floating
substructure, began generating power in early June 2013. At the commercial scale, some projects that
were in early planning stages last year have progressed to a more advanced stage, while other advanced-
stage projects have been placed on hold or abandoned altogether. These changes reflect the continuing
technology, market, and policy uncertainty surrounding offshore wind power development in the
United States. To help address the particular technical challenges of developing projects in the United
States, the U.S. Department of Energy (DOE) announced seven Advanced Technology Demonstration
grants in December 2012, three of which will be selected for additional funding following their initial
feasibility assessments.
As the U.S. market moves forward, it will continue to respond to and reflect the general trends occurring
in the global offshore wind market. Through 2012 and into 2013, offshore wind technology has
continued along historical trends. Turbine sizes and plant capacities have continued to grow, and water
depth and distances to shore have increased. As projects move further from shore, taller and larger
turbines may allow developers to take advantage of better and more sustained wind resources, thereby
increasing capacity factors. On the other hand, these deeper waters and longer distances present new
challenges and opportunities for foundations, drivetrains, installation logistics, and operations and
maintenance (O&M). Time will tell how well initial U.S. projects align with those global trends in light of
region-specific wind resource and seabed conditions.
This section presents an overview of the global offshore wind market and illustrates several of these
trends in more detail. This analysis draws upon an offshore wind project database compiled from
existing project databases and an ongoing review of developer announcements and industry news
coverage.4 Note that, for planned projects, this data relies primarily on developer projections and news
reports and that the status and details of projects under development are subject to change.
4The authors would like to acknowledge Navigant Research (formerly BTM Consult [BTM]), Green Giraffe Energy
Bankers, and the National Renewable Energy Laboratory (NREL) for their contributions of project information they
had previously collected. In addition, the team relied on publicly available information from the 4C Offshore Wind
Farm Database (4C Offshore 2013) and the Global Wind Energy Council (GWEC 2013).
Offshore Wind Market and Economic Analysis Page 2 Document Number DE-EE0005360
Summary of Key Findings – Chapter 1
» There are approximately 5.3 gigawatts (GW) of offshore wind installations worldwide.
» Several potential U.S. projects have achieved notable progress in the past year, with
eleven projects now in advanced stages of development.
» The average nameplate capacity of offshore wind turbines installed globally each year
has grown from 2.88 megawatts (MW) in 2007 to 4.03 MW in 2012.
» Globally, offshore wind projects continue to trend further from shore into increasingly
deeper waters, resulting in correspondingly higher capital costs. In parallel, however,
larger turbine sizes and hub heights are contributing to higher reported capacity factors.
» Approaches to drivetrain configurations continue to diversify in an effort to improve
reliability and reduce exposure to volatile supplies of the rare earth metals required for
direct drive generators.
» Global trends suggest that U.S. projects are likely to continue facing difficulties in
securing financing.
Offshore Wind Market and Economic Analysis Page 3 Document Number DE-EE0005360
1.1 Global Offshore Wind Development
Historically, the offshore wind market has primarily focused on northwest Europe; however, the Asian
market has shown signs of increasing activity over the past three years. In 2012, more than 1,100 MW of
wind power capacity was added globally, bringing the cumulative global total to 5,284 MW. The
majority of capacity additions occurred in European countries, with the United Kingdom alone
accounting for 756 MW of new capacity.5 Figure 1-1 summarizes the historical growth of the global
offshore wind market.
Figure 1-1. Historical Growth of the Global Offshore Wind Market
Note: Shows capacity in the year it was installed but not necessarily grid-connected. Includes commercial, test,
and intertidal projects.
Source: Navigant analysis of data provided by NREL and BTM
5 Various sources use different approaches for reporting annual capacity estimates. Navigant’s approach has
historically reported MW capacity installed in a particular year, regardless of whether it has been connected to the
grid. Other sources (e.g., the European Wind Energy Association [EWEA]) report MW capacity based on the year in
which it is connected to the grid. As a result, estimates of annual capacity additions may vary. For example, EWEA’s
estimate for 2011 European capacity additions shows 866 MW (EWEA 2012a), while BTM’s shows only 366 MW.
This is likely a result of 500 MW installed in 2010 not being connected to the grid until 2011.
Offshore Wind Market and Economic Analysis Page 4 Document Number DE-EE0005360
While capacity additions in 2012 represented a large increase over 2011, it failed to surpass the pace of
capacity additions in 2010. Much of the downturn from 2010 to 2011 can be attributed to the effects of the
global financial crisis, and while the upward trend has resumed annual additions continue to fall behind
prior expectations. In Asia, China continues to lead in terms of capacity, with 113 MW added in 2012 and
365 MW of cumulative capacity.6 While China previously announced plans to install 5 GW of offshore
wind by 2015 (Global Wind Energy Council [GWEC] 2013), it appears decreasingly likely that the goal
will be achieved, with only 222 MW of new capacity expected for 2013.7 Table 1-1 provides a summary of
the current global offshore market in number of projects, cumulative capacity, and number of turbines
by country.
Table 1-1. Summary of Installed Global Offshore Capacity through 2012
Region Country
Number of
Operational
Projects
Total Capacity
(MW)
Total Number of
Turbines Installed
Asia
China 13 365 138
Japan 5 28 16
South Korea 2 5 2
Europe
Belgium 3 380 91
Denmark 16 875 406
Finland 3 32 11
Germany 7 286 69
Ireland 1 25 7
Netherlands 4 247 128
Norway 1 2 1
Portugal 1 2 1
Sweden 5 164 75
United Kingdom 24 2,874 850
Total 85 5,284 1,795
Note: Includes commercial and test projects. Individual phases of projects at a single site may be counted as
separate projects.
Source: Navigant analysis of data provided by NREL and BTM
As shown in Table 1-1, the United Kingdom continues to lead the market, with 2,874 MW, more than
half of global installed capacity. The European market will continue to grow rapidly over the next two
years, with projects under construction in 2013 in Belgium, Denmark, Germany, Sweden, and the United
Kingdom. In fact, these new and expanding projects will likely contribute to a record-setting year, with
up to 2,900 MW expected to be installed before the end of 2013 (mostly in Germany and the United
Kingdom).
6 Notably, 251 MW of that capacity comprises inter-tidal projects, some of which were installed using methods more
similar to land-based wind farms. 7 As of September 2013.
Offshore Wind Market and Economic Analysis Page 5 Document Number DE-EE0005360
Apart from China’s 365 MW in the Asia region, Japan and South Korea have installed a combined 33
MW of demonstration-scale projects, with more under construction or planned. Like China, other Asian
countries have announced ambitious plans for growing their offshore wind markets. Taiwan has set a
target of 600 MW by 2020 and 3 GW by 2030, while the South Korean government set a target of 1.5 GW
by 2019, with an eventual goal of 2.5 GW (GWEC 2013).
Despite announced goals and targets, uncertainty around the political, economic, and supply-chain
factors influencing the global offshore wind market causes various forecasts and predictions for future
activity to range widely. Published forecasts for cumulative global offshore wind capacity range from
approximately 40 GW to more than 75 GW by 2022 (IHS Emerging Energy Research 2012; BTM 2012;
Douglas-Westwood 2013).
1.2 U.S. Project Development Overview
Since the last edition of this report, several potential U.S. offshore wind projects have achieved notable
advancements in their development processes. In addition to two BOEM commercial lease auctions for
federal Wind Energy Areas (WEAs), other, later-stage, commercial-scale projects have made incremental
progress toward starting construction. On the demonstration project front, the DOE awarded seven
Advanced Technology Demonstration (ATD) project grants in December 2012 that will help address
ongoing challenges and cost barriers to offshore wind energy. In addition, in June 2013, the University of
Maine (in partnership with the DOE) installed the United States’ first offshore wind turbine, a 1/8-scale
pilot turbine on a floating foundation. This section provides an overview of these and other updates to
U.S. offshore wind project developments.
The United States is still awaiting the installation of its first commercial-scale offshore wind project;
however, several developers continue to push forward on previously announced project plans. While
several dozen potential projects have been announced over the past five years, this report focuses on
those that have reached what Navigant considers to be an advanced stage of development. This
“advanced stage” includes projects that have accomplished at least one of the following three milestones:
» Received approval for an interim limited lease or a commercial lease in state or federal waters
» Conducted baseline or geophysical studies at the proposed site with a meteorological tower
erected and collecting data, boreholes drilled, or geological and geophysical data acquisition
system in use
» Signed a power purchase agreement (PPA) with a power off-taker
Note that each of these criteria represents a requisite step that a project will take before it gains final
approvals and reaches the construction phase. Simply having achieved one of these milestones,
however, does not guarantee that a project will ultimately move forward, and any two projects
qualifying as “advanced” may have made different levels of progress relative to one another.
In addition, some advanced-stage projects may be relatively inactive, with little evidence (or at least
public announcements) that they are continuing to progress their development plans. Conversely, some
projects that are making visible progress have yet to achieve any of the milestones that would categorize
them as advanced stage.
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A map showing the announced locations, capacities, and recent activities for each of eleven advanced-
stage projects appears in Figure 1-2.
Note: One potential project (the Deepwater Wind Energy Center) spans federal waters off the coasts of
Massachusetts and Rhode Island; this map splits its estimated 1,000-MW capacity between the two states.
Source: Navigant analysis
These eleven projects represent 3,842 MW of planned capacity. As shown in the figure, roughly two-
thirds of this potential capacity lies in federal waters (i.e., typically outside a three-nautical-mile state
boundary). Notably, this represents a reversed trend from two years ago, when a greater share of
advanced-stage planned capacity lied within state waters. This shift arose in part from developments in
federal leasing activities, as well as a refocusing of development efforts in Texas state waters (the federal
water boundary in Texas lies further out at nine nautical miles). Table 1-2 provides additional details
about each of the eleven advanced-stage projects, including nameplate capacity, number of turbines,
turbine make and model, turbine capacity, water depth and distance to shore, status notes, and an
estimated completion date.
Figure 1-2. Proposed U.S. Offshore Wind Energy Projects in Advanced Development Stages by
Jurisdiction and Project Size
Offshore Wind Market and Economic Analysis Page 7 Document Number DE-EE0005360
Table 1-2. Summary of Advanced-Stage U.S. Projects
Project Name (State)
Proposed
Capacity
(MW)
Turbines
(#)
Distance
to Shore
(Miles)
Average
Water
Depth (m)
Projected
Turbine
Model
Status Notes
Target
Completion
Dateb
Block Island Offshore
Wind Farm (Deepwater)
(RI)
30 5 3 22 Siemens SWT
6.0-120 (6 MW)a
National Grid has agreed to a 20-year PPA. U.S. Army
Corps of Engineers environmental studies completed.
Submitted final state and federal permit applications in
October 2012. Developers recently proposed an alternate
location for the project’s export cable at Scarborough State
Beach after a proposed landing was rejected by the Town
of Narragansett.
2015
Lake Erie Offshore Wind
Project (Great Lakes)
(OH)
27 9 7 18 Siemens SWT-
3.0-101(3 MW)
Lease signed with state of Ohio. Invited to negotiate
contract with DOE for an initial award under the Wind
and Water Power Program in 2012. Geotechnical surveys
completed. DOE ATD grant recipient.
2015
Fisherman's Energy:
Phase I (Atlantic City
Wind Farm)(NJ)
25 5 3 11.5 XEMC-Darwind
XD115 (5 MW)
Fully permitted. Completion date unclear after the New
Jersey Board of Public Utilities denied a settlement
agreement between Fisherman's and the NJ Division of
Rate Counsel over concerns about the project’s potential
ratepayer impacts (July 2013). DOE ATD grant recipient.
2015
Cape Wind Offshore
(MA) 468 130 10 10
Siemens SWT
3.6-107 (3.6
MW)a
Approved for federal waters; commercial lease offered in
April 2010. Commenced geotechnical and geophysical
survey operations in July 2012. PPA in place for 77.5% of
project's power through National Grid and NStar (with
contingency that construction begins by end of 2015).
2016
Dominion Virginia Power
- Virginia Offshore Wind
Technology Advancement
Project (VA)
12 2 23.5 26 Alstom Haliade
6 MW
In February 2013, Dominion submitted an unsolicited
research lease application for an area off the coast of
Virginia. In September 2013, the group was the winning
bidder in the second competitive lease sale for an adjacent
U.S. offshore wind area. DOE ATD grant recipient.
2017
Fisherman's Energy:
Phase II (NJ) 330 66 7 17.5
XEMC-Darwind
XD115 (5 MW)
Received a meteorological tower rebate from the state and
began baseline surveys in August 2009. Has interim lease
for initial assessment of wind farm feasibility.
2018
Offshore Wind Market and Economic Analysis Page 8 Document Number DE-EE0005360
Galveston Offshore Wind
(Coastal Point Energy)
(TX)c
150 55-75 7 14.5 XEMC-Z72-2000
(2-2.75 MW)
Has lease from Texas General Land Office. Announced
intention to install a 750-kW test turbine. 2018
Baryonyx Rio Grande
Wind Farms (North and
South) (TX)c
1000 100-200 7.8 20.5 Siemens SWT
6.0-120 (6 MW)a
Received lease from Texas General Land Office in 2009.
Army Corps of Engineers environmental studies
underway. DOE ATD grant recipient.
2019
Garden State Offshore
Energy Wind Farm (NJ) 350 58-70 20 27 (5 or 6 MW)
Awarded interim limited lease; began baseline surveys in
2009. State funding pulled in October 2012 because of
inaction. Launched state-of-the-art buoy to study offshore
weather conditions in November 2012.
2019
Deepwater Offshore Wind
Energy Center 1000 167-200 20 40 (5 or 6 MW)
In August 2013, Deepwater was the winning bidder in the
first competitive lease sale for a U.S. offshore wind area. 2019
NRG Bluewater's Mid-
Atlantic Wind Park (DE) 450 150 12.7 20 3 MW
Received one of the first U.S. offshore leases (non-
competitive) from BOEM in October 2012 as part of
"Smart from the Start" program; however, Delmarva had
canceled a PPA for 200 MW of the power. The project
website states that the project is officially on hold, and it is
unclear whether Bluewater will develop or sell the
project.
2020
a) These projects have committed to a specific turbine with a turbine supply agreement in place. All other stated turbines are based on developer statements and may change.
b) Dates shown in this table are based on developer statements and Navigant analysis; they may change based on permitting, leasing, surveying, and other activities.
c) Leasing and permitting requirements for projects in Texas state waters do not involve the Federal Energy Regulatory Commission (FERC) or the BOEM Minerals Management
Service and may move more quickly than projects in federal waters.
Source: Navigant analysis based on published project information, developer statements and media coverage
Offshore Wind Market and Economic Analysis Page 9 Document Number DE-EE0005360
1.2.1 Forecast Capacity and Completion Dates
According to developer statements, seven of the eleven projects have target completion dates before the
end of 2018, and developers for three of the projects——Block Island, Cape Wind, and Fisherman’s
Energy I—continue to compete to be the first commercial-scale offshore wind farm online in U.S. waters.
Given global historical trends, however, it is unlikely that all eleven of these projects will achieve these
targets, due to delays, cancelations, or other regulatory or market issues. Viewing these projects in the
context of these global trends and assumptions about their rates of completion, Navigant expects that the
initial growth of the U.S. offshore market would follow a trajectory like that shown in Figure 1-3,
assuming all eleven of these projects ultimately move forward.
Figure 1-3. Growth Trajectory for U.S. Offshore Wind Based on Forecast Construction Dates
Source: Navigant analysis of collected project data
In addition to these advanced-stage projects, the DOE-supported ATD projects will continue to make
progress over the next few years. Their smaller scale, receipt of targeted federal support, and state
support may facilitate their installation and make them among the first projects in U.S. waters. Section
1.2.3 describes these projects in more detail.
1.2.2 Notable Developments in Advanced-Stage Projects
This section briefly highlights some of the key developments and advancements that have occurred in
the development of U.S. offshore wind projects since the last edition of this report.
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1.2.2.1 BOEM Advancements and Leasing Activities
The BOEM continued to make steady progress on its Smart from the Start initiative to facilitate siting,
leasing, and construction of offshore wind energy projects on the Atlantic Outer Continental Shelf.8
Notably, in October 2012, it issued its first non-competitive commercial lease to NRG Bluewater
Delaware for the intended site of its 450-MW Mid-Atlantic Wind Park. However, as noted in Table 1-2,
NRG’s anticipated initial off-taker, Delmarva Power, had previously cancelled its PPA for the project. It
is yet unclear what steps, if any, NRG will take to move the project forward.
In 2013, BOEM also made significant progress in assessing the suitability of and interest in each of six
WEAs. Under the initiative, BOEM selected these areas for expedited assessments and planning to help
facilitate development of projects along the Atlantic Coast. Figure 1-4 shows the location of each of these
six areas.
8 See http://www.boem.gov/Renewable-Energy-Program/Smart-from-the-Start/Index.aspx
Offshore Wind Market and Economic Analysis Page 11 Document Number DE-EE0005360
Figure 1-4. Map of BOEM Atlantic Wind Energy Areas
Source: BOEM 2012
BOEM has made initial progress in each of these areas by engaging local stakeholders and government
agencies, issuing requests for interest and calls for information for commercial developers and initiating
environmental studies. In mid-2013, it held its first two competitive auctions and awarded leases for two
of these WEAs. On July 31, 2013, Deepwater Wind New England LLC submitted the winning bid for two
leases within the Rhode Island/Massachusetts WEA, and it subsequently signed the lease on September
20. On September 4, 2013, Virginia Electric and Power Company (doing business as Dominion Virginia
Power) won the second BOEM competitive lease for the Virginia WEA. Award of each lease enables the
lessee to move forward with its site assessment plans and subsequent construction and operations plans.
Offshore Wind Market and Economic Analysis Page 12 Document Number DE-EE0005360
Since the fall of 2012, BOEM has also received and responded to several unsolicited lease requests for
project sites related to three of the DOE ATD projects. Key activities include the following:
» In December 2012, BOEM issued a notice of no competitive interest for a previously submitted
(October 2011), unsolicited commercial lease submitted by Statoil for a site in Maine related to its
Hywind demonstration project.
» In February 2013, the Commonwealth of Virginia Department of Mines, Minerals and Energy
(DMME), in partnership with Dominion Virginia Power, submitted its second unsolicited
research lease request for an area related to the Dominion ATD project.
» In May 2013, Principal Power submitted an unsolicited application for a site in Oregon for its
WindFloat Pacific Pilot Project
See Section 1.2.3 for additional information on each of these ATD projects.
1.2.2.2 Cape Wind – Focus on Financing and Year-End Construction Start
The 468-MW Cape Wind Offshore wind project has continued to press forward despite its long history
of public comment, technical reviews, and legal challenges. A significant milestone for the project was
the Massachusetts Department of Public Utilities’ approval of Cape Wind’s PPA with NSTAR in
November 2012. The NSTAR PPA is for 27.5 percent of Cape Wind’s power that, when combined with
National Grid’s PPA for 50 percent, represents the majority of the project’s output. Subsequent attention
turned to solidifying financing for the project, and developers confirmed a $200 million investment from
PensionDanmark, a Danish pension fund, in July 2013. The project has also indicated tentative
commitments from the Bank of Tokyo-Mitsubishi UFJ (which is coordinating the project’s financing) and
Siemens (the projects’ turbine supplier), but specific dollar amounts are not confirmed. Notably, the
PensionDanmark investment is conditioned on Cape Wind securing the remainder of its $2.6 billion
financing and beginning construction by the end of 2013, which is the deadline for the project to take
advantage of the federal Investment Tax Credit (Lindsay 2013, McKenna 2013).
1.2.2.3 Fishermen’s Energy I (Atlantic City Wind Farm) – Subsidies, Costs and Rate Impacts
As one of the other more advanced offshore projects, Fishermen’s Energy Atlantic City Windfarm was
making encouraging progress before encountering a series of decisions in 2013 that have further delayed
the proposed 25-MW pilot project. As the project sought to qualify for New Jersey ratepayer-funded
subsidies, the New Jersey Division of Rate Counsel has opposed the project, citing concerns about the
potentially high costs to ratepayers (Johnson 2013). In an attempt to reach a settlement on the issue, the
developers submitted a filing to the Division in March 2013, which the Division subsequently accepted
and endorsed to the New Jersey Board of Public Utilities (BPU). In mid-July, however, the BPU rejected
the settlement, citing several specific objections related to potential ratepayer impacts and benefits
(Milford 2013). The BPU gave the developers an opportunity to respond to the objections, but at the time
this report was published, no further agreements had been announced. Later that month, the Division of
Rate Counsel filed a reply brief to the BPU's position, affirming that the project meets the “net benefits”
test required by the Offshore Wind Economic Development Act (OWEDA) and urging the BPU to move
ahead with the project. This issue remained unresolved as of this report’s publication.
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Notably, Fisherman’s Energy I is also one of the DOE’s ATD project grant recipients; details of the
technological innovations it hopes to demonstrate appear in Section 1.2.2.3.
1.2.2.4 Block Island – Navigating Public Opposition
The third later-stage, advanced U.S. project, Deepwater’s 30-MW Block Island Offshore Wind Farm,
faced increasing public scrutiny and opposition in 2013. The project has completed its U.S. Army Corps
of Engineers environmental studies, submitted its requisite permits, and secured a 20-year PPA from
National Grid. In August 2013, the developers adjusted their plans after failing to gain approval from the
Town of Narragansett for the sale of easements for the originally planned location of the project’s
transmission line. (Campbell 2013). As of this report’s publication, Deepwater had announced a
proposed alternate site for the cable to come ashore at Scarborough State Beach and was awaiting
approval from the State Properties Committee (Kuffner 2013).
1.2.3 U.S. DOE Advanced Technology Demonstration Projects
This section provides a brief overview of each of the seven projects that have received DOE ATD grants.
As previously stated, the DOE will provide up to $4 million to each project to complete initial
engineering, planning, and feasibility assessments. The DOE will then select up to three of the projects to
receive additional funding to help carry the projects through final design, fabrication, and installation.
Note that some of these projects meet Navigant’s advanced-stage project criteria and appear in Table 1-2.
1.2.3.1 New England Aqua Ventus I
The DeepCwind Consortium, a team led by the University of Maine (UMaine), has proposed a pilot
floating offshore wind farm of two 6-MW, direct-drive turbines on concrete, semi-submersible
foundations near Monhegan Island, Maine. As mentioned previously, the UMaine separately partnered
with the DOE to install and connect a 1/8-scale prototype floating turbine to the grid on June 13, 2013.
The 65-foot-tall prototype was designed and fabricated at UMaine; assembled at Cianbro's facility in
Brewer, Maine; and towed nearly 30 miles from Brewer to Castine, Maine, by the Maine Maritime
Academy. The prototype is anchored off the coast of Castine in approximately 24 meters of water and is
the first grid-connected offshore wind platform in the Americas.
The Consortium will use the data acquired during the deployment of the prototype to optimize the
design of UMaine's VolTurnUS floating turbines (patent pending). The VolTurnUS turbines utilize
floating concrete foundations that the Consortium anticipates will result in improvements to
commercial-scale production and provide offshore wind projects with a cost-effective alternative to
traditional fixed steel foundations. Once scaled to full size and incorporating economies of scale (based
on the number of turbines), the team hopes to reduce the cost of offshore wind to a point that it can
compete (without subsidies) with other forms of electricity generation.
On August 30, 2013, UMaine filed a bid with the Maine Public Utilities Commission (PUC) to provide
long-term power to the grid. As of this report’s writing, anticipated next steps were for the PUC staff to
review the proposal and request supplemental information prior to asking UMaine to develop a term
Offshore Wind Market and Economic Analysis Page 14 Document Number DE-EE0005360
sheet or contract. The PUC plans to decide whether to award UMaine a long-term contract before
December 31, 2013.
1.2.3.2 Hywind Maine
Statoil North America of Stamford, Connecticut, planned to deploy four 3-MW wind turbines on floating
spar buoy structures approximately 19 miles offshore in the Gulf of Maine in approximately 140 meters
of water. These spar buoys will be assembled portside (to help reduce installation costs versus
constructing offshore) in Boothbay Harbor, Maine, and then towed to the installation site to access the
Gulf of Maine's extensive deep water offshore wind resources. The Hywind Project follows Statoil's first
Hywind demonstration project off the coast of Norway; in 2009, Statoil installed a single 2.3 MW turbine
(with an 82-meter rotor diameter) on a spar buoy with 100-meter draft to test the effects of wind and
waves on a floating turbine. The project has produced 15 megawatt-hours (MWh) since startup in 2010.
In January 2013, the Maine PUC voted to support a term sheet for a 20-year PPA with Central Maine
Power Company. However, the project was placed on hold in July 2013 after new legislation created
uncertainty regarding the state's prior approval of the project. That approval had included the Maine
PUC’s agreement for the project to receive ratepayer-funded subsidies after Statoil submitted the only
bid in the state’s competitive process. In late June, the Maine legislature passed a bill that re-opened the
bidding process for the ratepayer subsidies and UMaine submitted a similar proposal for the Aqua
Ventus project. On October 15, 2013, citing increased uncertainty created by the change in legislation, as
well as more general schedule challenges, Statoil announced its intent to abandon the Hywind Maine
project and focus its floating offshore wind efforts on a proposed demonstration in Scotland.
1.2.3.3 Fisherman’s Energy I (Atlantic City Wind Farm)
As described in Section 1.2.2.3, Fishermen’s Energy proposes to install five 5-MW, direct-drive turbines
in state waters 2.8 miles off the coast of Atlantic City, New Jersey. The project will result in an advanced,
bottom-mounted foundation design and innovative installation procedures that aim to mitigate potential
environmental impacts. Innovations or “U.S. firsts” associated with the project include the following:
» First commercial use of Lockheed Martin Wind Tracer
» First commercial use of AXYS Floating Light Detection and Ranging (LiDAR) System
» 5-MW, direct drive turbine installed in an offshore environment
» New technology, post-construction, intensive avian impact studies
All necessary federal and state approvals have been issued for the proposed project, and Fishermen’s
Energy anticipates the project to achieve commercial operation by the fall of 2015. An update on the
status of the project appears in Section 1.2.2.3.
1.2.3.4 Virginia Offshore Wind Technology Advancement Project (VOWTAP)
A team led by Dominion Virginia Power of Richmond has proposed to design, develop, and install two
6-MW, direct-drive turbines approximately 27 miles off the coast of Virginia Beach. The project will
Offshore Wind Market and Economic Analysis Page 15 Document Number DE-EE0005360
utilize innovative foundations that offer the strength of traditional jacket or space-frame structures but
use substantially less steel.
Several organizations are collaborating with Dominion on the project: Alstom, a wind turbine
manufacturer; the Commonwealth of Virginia DMME; the National Renewable Energy Laboratory
(NREL); Virginia Tech, representing the Virginia Coastal Energy Research Consortium; KBR, a global
engineering and construction services firm with experience in offshore wind; Newport News
Shipbuilding, a division of Huntington Ingalls Industries; and Tetra Tech, an environmental consulting
firm.
Innovations associated with the VOWTAP that are being developed include the following:
» Alstom HALIADE 150-meter, 6-MW rotor
» Permanent Magnet Direct Drive (PMDD) generator
» Innovative foundation design (i.e., “twisted jacket”) and installation techniques (allowing
reduced dependence on heavy-lift vessels)
» Wake effects and wind farm controls
» Supervisory control and data acquisition (SCADA) and condition-based maintenance (CBM)
systems
In February 2013, DMME submitted an unsolicited request to BOEM for a research lease in federal
waters off the coast of Virginia. BOEM issued a Request for Competitive Interest for the research lease
site in August; however, as of this report’s writing, BOEM had not yet issued a Determination of No
Competitive Interest. The research lease area is immediately adjacent to the western border of the
Virginia WEA, shown in Figure 1-4.
1.2.3.5 Project Icebreaker
Lake Erie Energy Development Corporation (LEEDCo), a regional public-private partnership based in
Cleveland, Ohio, plans to install six 3-MW, direct-drive wind turbines on “ice breaker” monopile
foundations that are designed to reduce ice loading. The project will be installed on Lake Erie,
approximately seven miles off the coast of Cleveland. The Ohio Department of Natural Resources
(ODNR) has identified the proposed site as “favorable,” and LEEDCo and ODNR have signed a land
lease option for the site. LEEDCo has been collecting wind measurements at the Cleveland water intake
crib, three miles offshore, since 2005. An extensive feasibility study was published in 2009, which
confirmed the environmental and technical viability of offshore wind energy in Lake Erie. In 2013, the
project team completed the first phase of a site-specific subsurface investigation program.
1.2.3.6 Gulf Offshore Wind (GOWind)
Baryonyx Corporation, which is based in Austin, Texas, proposed to install three Siemens 6-MW, direct-
drive wind turbines in state waters near Port Isabel, Texas. The project will demonstrate an advanced
jacket foundation design and integrate lessons learned from the oil and gas sector on hurricane-resistant
facility design, installation procedures, and personnel safety. According to Baryonyx’s CEO, a key
project objective includes demonstrating how the cost of energy from offshore wind can be driven down
Offshore Wind Market and Economic Analysis Page 16 Document Number DE-EE0005360
by combining an excellent wind source and efficient large capacity turbines with the design, fabrication,
and installation experience that already exists in the Gulf of Mexico.
Baryonyx has negotiated a lease with the Texas General Land Office for more than 67,000 acres of
submerged state lands for three offshore wind farm sites between Corpus Christi and Brownsville. The
GOWind project occupies a small portion of the 41,455-acre Rio Grande Lease Area off South Padre
Island. In August 2013, Baryonyx submitted an application to the U.S. Army Corps of Engineers,
Galveston District, for the construction of the three-turbine demonstration project. As of this report’s
writing, the application had been placed on public notice until October 18, after which time it will
undergo the standard review process.
The founders of Baryonyx successfully developed the 150-MW Ormonde offshore project off the west
coast of the United Kingdom using 5-MW turbines on jacket foundations.
1.2.3.7 WindFloat Pacific (WFP)
Seattle, Washington-based Principle Power has proposed to install five semi-submersible, floating
foundations outfitted with Siemens 6-MW, direct-drive offshore wind turbines. The project will be sited
15 miles from Coos Bay, Oregon in approximately 350 meters of water. Subsea cabling will export power
to the planned South Dunes Power Plant, which is a combined-cycle natural gas power plant associated
with the Jordan Cove Energy Project, a $7.5-billion liquid natural gas export facility currently under
development at the Port of Coos Bay.
Principle Power maintains that the WindFloat design is more cost-effective than traditional offshore
wind foundations because the entire turbine and floating foundation will be built on shore and installed
with conventional tug vessels. The innovations associated with the WindFloat design include the
following:
» Static and dynamic stability provide pitch performance low enough to use conventional (i.e.,
fixed-foundation), commercial offshore turbines
» The design and size allow for onshore assembly and commissioning
» The shallow draft of the semi-submersible foundation allows the assemblies to be sited,
transported (via wet tow), and deployed in a wide range of water depths
WindFloat's semi-submersible foundation includes patented water entrapment (heave) plates at the base
of each of three vertical columns. A closed-loop, active water ballast system moves water between the
columns in the semi-submersible foundation in response to changes in wind force and direction. This
allows the mast to remain vertical, thereby optimizing electricity production.
On May 14, 2013, Principle Power submitted an unsolicited commercial lease request to BOEM for the
demonstration project. The application indicated that Principle Power and Jordan Cove Energy are
negotiating a PPA with a term and price sufficient to meet the economic needs of the WFP Project. As of
October 2013, BOEM had determined the lease request to be complete and issued a Request for
Competitive Interest to determine competitive interest in and understand what stakeholders would be
affected by development of the proposed site.
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1.3 Capital Cost Trends
Offshore wind power prices (both historical and announced costs for proposed projects) have been
following a generally increasing trend (Musial and Ram 2010; UKERC 2010; Wiser et al. 2011, Navigant
2013). These cost increases are a function of several trends: a movement toward deeper-water sites
located farther offshore; increased siting complexity; and higher contingency reserves that result from
more limited operational reserves and greater uncertainty when working in the offshore environment
(Chapman et al. 2012). Figure 1-5 shows the reported capital costs over time for both operational projects
and those under construction.
Figure 1-5. Reported Capital Cost Trends for Global Offshore Wind Projects over Time
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1990 1995 2000 2005 2010 2015
Rep
ort
ed C
apit
al E
xpen
dit
ure
s (2
01
2$
/kW
)
Operational Projects Projects Under Construction
Note: Data was not available for all projects. Capital costs were inflated to 2012 currency in
original currency and converted to U.S. dollars using 2012 average exchange rates. BARD
Offshore I was excluded due to a cost overrun of more than 1 billion Euros.
Source: NREL analysis9
For those projects installed in 2012 for which data was available, the average reported capital cost was
$5,384/kW. As will be discussed in Section 1.4, some of the key technology trends in the offshore wind
9 Analysis was based on peer-reviewed literature, industry white papers, press releases, developer and contractor
press releases, and industry databases. Most cost estimates are self-reported figures from project developers and
could not be independently verified.
Offshore Wind Market and Economic Analysis Page 18 Document Number DE-EE0005360
market aim to help slow and eventually reverse the increasing cost trend, even as projects face greater
challenges. In addition to potential advancements in equipment and installation approaches, improved
capacity factors may help further mitigate increased capital costs through better energy capture and
conversion.
Notably, these capital cost estimates from global projects may not capture all of the costs for which a
project in the United States might be responsible. For example, in Germany the costs of grid connection
are borne by the transmission system operator and not by the project owner. Nonetheless, recent
estimates of the capital cost for offshore wind power in the United States are on the order of $5,000/kW
to $6,000/kW (Tegen et al. 2012). These capital costs are well distributed across each aspect of the
project’s development and construction, suggesting that improvements in each area could contribute to
future cost reductions. Figure 1-6 shows the estimated all-in capital cost breakdown for a hypothetical
500-MW offshore wind farm in U.S. waters developed as part of a supply chain study Navigant
published in early 2013 (Navigant 2013).
Figure 1-6. Offshore Wind Plant Capital Cost Breakdown
Source: Navigant 2013
As shown, the turbine equipment costs (including the nacelle, tower and blades) comprise the largest
share (33 percent) of the capital cost, with the foundation and substructure representing an additional 22
percent. Notably, the bottom-up estimates conducted for this study resulted in construction finance-
related costs that comprise 12 percent of the overall plant capital cost (see Navigant 2013 for a detailed
list of these estimated costs). Some offshore wind studies, however, exclude construction financing costs
from their capital cost analyses. Figure 1-7 presents a similar breakdown of overnight capital costs
(which exclude construction financing).
Offshore Wind Market and Economic Analysis Page 19 Document Number DE-EE0005360
Figure 1-7. Offshore Wind Plant Capital Cost Breakdown (without Construction Financing)
Source: Navigant 2013
As shown, under this assumption, the turbine’s share of the overall capital cost (before installation)
jumps to 38 percent, while the foundation and substructure increases to 25 percent.
1.4 Market Segmentation and Technology Trends
As noted in the previous edition of this report, global offshore wind projects have followed several
general trends over time that will influence the developing U.S. market. In particular, wind farm sites
continue to move further offshore into deeper waters. While this trend helps reduce visual impacts and
public opposition to offshore wind, it also requires advancements in foundation technologies and affects
the logistics and costs of installation and maintenance. Related trends in turbine design continue to shift
toward higher capacity machines, which combine with increasing hub heights and rotor diameters to
allow projects to take better advantage of higher wind speeds. Similarly, prototype machines are testing
alternative drivetrain configurations that aim to increase efficiencies, lower turbine weights, and
decrease the frequency of costly trips to service and maintain each turbine. The following sections
discuss each of these trends in more detail.
1.4.1 Depth and Distance from Shore
As noted above, developers are increasingly building offshore wind plants further from the coast and in
deeper waters. A project’s distance is commonly measured from the approximate center point of the
developed area to the nearest point of land. While this metric approximates the relative likelihood that a
project is visible from land, other measured distances have a greater influence on a project’s cost and
operation. The distance to the point of interconnection, for example, directly impacts the material and
construction cost of the project’s export cable and factors into line-loss calculations for the exported
energy. Similarly, distances to the nearest construction and service ports impact, respectively, costs of
installation and ongoing O&M costs. For simplicity, this report focuses on the average distance from
Offshore Wind Market and Economic Analysis Page 20 Document Number DE-EE0005360
shore metric, which generally reflects the trends of all three distances. Figure 1-8 illustrates the average
distance from shore for each global offshore wind project based on the year in which it was installed.
Figure 1-8. Average Distance from Shore for Offshore Wind Projects over Time
Note: Multi-phase projects were combined and are reported at the latest year when turbines were added at the
project site. Expansions or phases of existing projects sites currently under construction were omitted to avoid
skewing the data.
Source: Navigant analysis of data provided by NREL and BTM
As shown above, an increasing number of projects have been installed in waters greater than 10 and
even 20 miles from shore since 2009, with many more currently under construction. For commercial-
scale projects with capacity additions in 2012, the average water depth was about 23 meters, and the
average distance from shore was 24 miles. Logically, these greater-distance project sites generally entail
increasing water depths, adding to the challenges faced in a project’s design and construction. Figure 1-9
shows the relationship between average distance from shore and average water depth for global offshore
wind projects (both operational and under construction), as well as planned U.S. projects in advanced
stages of development.
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Figure 1-9. Depth and Distance from Shore for Global Offshore Wind Farms
Note: Bubble size indicates projects’ relative capacities; several projects are labeled for scale. Multi-phase
projects were combined to show cumulative project capacity.
Source: Navigant analysis of data provided by NREL and BTM
As shown in Figure 1-9, several projects currently under construction (particularly in Germany) are
continuing to push into more distant and deeper waters. Advanced-staged projects in the United States
are generally planned for closer to shore than more recent European projects; however, some are sited in
relatively deeper waters. Notably, some of the BOEM WEAs have average depths that exceed those of
any currently operating commercial projects. The Massachusetts WEA, for example, has an average
depth of 50 meters and a maximum depth of 64 meters.
Offshore Wind Market and Economic Analysis Page 22 Document Number DE-EE0005360
1.4.2 Plant Characteristics
The trend of more distant and deeper plant sites has coincided with a continued shift toward larger and
higher-capacity projects. Figure 1-10 illustrates the increasing trend in plant sizes over time for both
operational projects and those under construction.
Figure 1-10. Global Offshore Wind Plant Capacities over Time
Note: Plant capacities are shown for the year each project reached completion. Multi-phase projects were
combined to show cumulative project capacity and are reported at the latest year when turbines were
added at the project site.
Source: Navigant analysis of data provided by NREL and BTM
As shown in Figure 1-10, the cumulative average capacity for projects completed from 2010 through the
end of 2012 is approximately 173 MW.10 By comparison, the average per-project capacity for installations
currently expected to reach completion in 2013 or 2014 is 247 MW, suggesting that the average
developed area for these projects is also increasing. As developers move further from shore, they also
gain access to generally stronger and more consistent wind resources, particularly at higher hub heights.
As a result, new plants have shown a slow but steady increase in reported capacity factors over time, as
illustrated in Figure 1-11.
10 This includes the total capacity for multi-phase projects that added turbines at an existing site over the course of
more than one year (e.g., Germany’s BARD Offshore and the United Kingdom’s Greater Gabbard site)
Offshore Wind Market and Economic Analysis Page 23 Document Number DE-EE0005360
Figure 1-11. Reported Capacity Factors for Global Offshore Wind Plants over Time
Note: Plant capacity factors are shown for the year each project reached completion. Multi-phase projects
were combined to show a single capacity factor and are reported at the latest year when turbines were
added at the project site.
Source: Navigant analysis of data provided by NREL and BTM
1.4.3 Turbine Trends
The first generation of commercial wind turbines installed offshore were essentially marinized versions
of land-based machines. As turbine manufacturers gained experience, and as the size of the market for
offshore wind turbines expanded, they began to introduce new turbine models designed specifically to
address offshore design conditions and requirements. Offshore wind turbine models are now diverging
from their land-based counterparts, due to differing system value drivers (e.g., balance of station costs
represent 70 percent of offshore wind energy capital costs versus 30 percent for land-based) and fewer
logistical constraints for offshore wind turbines (e.g., scaling of land-based machines is often limited by
transportation considerations).
Offshore specific designs have also shown an accelerated scaling trend compared to land-based
machines. Modern land-based machines range from roughly 1.5 MW to 3.0 MW, employ rotors ranging
from 70 to 120 meters, and stand on towers that are typically 80 meters or higher (Wiser and Bolinger
2013). Compared to an average 2-MW capacity in 2000, today’s offshore machines have grown to sizes
ranging from 3 MW to 6 MW, employ rotors in excess of 120 meters in diameter, and stand with hub
heights of between 70 and 100 meters. Machines in the prototype or advanced design phase imply that
the trend will continue, with capacities of between 4 MW and 8 MW. These machines, which are
Offshore Wind Market and Economic Analysis Page 24 Document Number DE-EE0005360
expected to become commercially available in the 2014 to 2016 timeframe, also explore a variety of
innovative drivetrain and generator configurations that aim to increase capacity and reliability while
minimizing tower top mass (i.e., rotor plus nacelle).
1.4.3.1 Turbine Capacity
The average nameplate capacity of offshore wind turbines installed between 2007 and 2012 ranged from
2.88 MW to 3.30 MW.11 Since then, the average size of newly installed turbines has steadily increased to
4.03 MW as projects have increasingly deployed 3.6 MW and 5 MW turbines (210 and 18 units,
respectively, in 2012). 2012 also saw the first installation of REpower’s 6.15-MW turbine at Belgium’s
Thornton Bank Phase II project site. Figure 1-12 shows the annual average turbine size, weighted by each
project’s share of annual capacity additions, for all global projects and planned U.S. projects.
Figure 1-12. Average Turbine Size for Historic Global and Planned U.S. Offshore Wind Farms
Note: Average turbine size is based on an annual capacity-weighted figure – each individual turbine
installed is factored into the annual average.
Source: Navigant analysis of data provided by NREL and BTM
As shown in Figure 1-12, this trend toward larger turbines will likely slow over the next two years, with
the average turbine size for known projects under construction totaling 4.10 MW. However, the upward
trend will likely resume toward 2018 as developers begin deploying more 5-MW or 6-MW turbines. As
11 This “capacity-weighted” average accounts for each individual turbine installed at projects globally each year.
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illustrated in Figure 1-12, this will likely include several U.S. advanced-stage projects, which are
expected to have an average capacity of 4 to 5 MW.
The drivers for this offshore wind turbine scaling are compelling, with potential for significant economic
efficiencies for both the turbine and the plant as a whole. For example, turbine economies of scale may
arise from components that do not vary in cost in direct proportion to turbine size, such as controls and
foundations (EWEA 2009a). Advancements in materials, design, processes, and logistics have also
allowed manufacturers to build larger components while lowering system costs (EWEA 2009a). For
components like blades and towers, the costs of which would theoretically increase in proportion to
turbine size, such innovations have mitigated the otherwise expected cost increases. This allows turbines
to achieve significant energy capture improvements via higher hub heights and larger rotors (Lantz,
Wiser, and Hand 2012). Offshore wind turbines also avoid many of the size constraints of land-based
turbines, due to the potential for portside manufacturing and marine transport. The trend toward siting
projects further from population centers also reduces concerns that can constrain the design of land-
based machines, including shadow flicker, noise emissions, and visibility impacts.
Notably, the cost drivers for offshore wind plants are weighted significantly more toward balance of
plant procurement and installation relative to the land-based wind cost drivers. Such balance of plant
costs represents approximately 70 percent of capital expenditures for offshore wind plants, compared to
only 30 percent for land-based projects (Tegen et al. 2012). Greater turbine size also enables fewer units
to achieve the same installed capacity, helping to reduce total installation and balance of plant costs on a
$/kW basis. Increasing the size of individual generating units can also lead to fewer site visits for
preventative and corrective maintenance activities, representing a significant advantage given the
difficulties of accessing turbine in harsh open-ocean conditions (van Bussel and Bierbooms 2003).
Given these drivers, turbine scaling will continue to play an important role in offshore wind technology.
A number of wind turbine manufacturers, industry consortia, and academic research groups continue to
explore the technical and economic feasibility of very large turbine designs, with rated capacities above 8
MW (BVG Associates 2012). Several of these entities have announced conceptual designs for large
machines, including, among others, American Super Conductor (10 MW), Azimut Consortium (15
MW),12 GE (15 MW), Goldwind (10 MW), Guodian United Power (12 MW), Mecal (12 MW), Sinovel (10
MW), and Sway (10 MW). Furthermore, the Upwind project explored the technical feasibility of a 20-
MW wind turbine concept and found no significant problems, provided that key technologies can be
developed and integrated into the system to offset or mitigate the mass increases that would be assumed
from classical scaling theory (EWEA 2011).
The turbine concepts in the development pipeline today (and those machines envisioned for future
development) will require a vast array of technical innovations throughout the turbine as well as in
foundations, installation strategies, balance of plant equipment, and O&M practices. Advancements in
manufacturing will be needed as the castings and bearings for such large turbines push the limits of
12 The Azimut Project is a Spanish research consortium composed of major industrial companies (including Gamesa,
Acciona, Alstom, Iberdrola Renovables, as well as 22 research organizations) that aims to develop a 15-MW wind
turbine for the 2020 timeframe (Gamesa 2010).
Offshore Wind Market and Economic Analysis Page 26 Document Number DE-EE0005360
existing foundries and other players in the wind supply chain. New foundation designs, vessel
capabilities, and innovative staging and assembly strategies will likely be as important as the
development of future generations of wind turbines. Possible changes in design architecture and an
ability to withstand a wider array of design considerations, including hurricanes, surface icing, and
rolling and pitching moments associated with deployment on floating platforms, will also likely be
needed.
1.4.3.2 Hub Height and Rotor Diameter
Increasing hub heights and larger blade designs have accompanied the continuing trend toward larger
turbine sizes. Taller towers allow developers to access the increased wind speeds that occur at higher
elevations, while larger blades increase each turbine’s swept area. In combination, these factors can
capture more energy at a particular turbine location. Figure 1-13 and Figure 1-14 show the hub height
and rotor diameters, respectively, of global offshore wind projects over time.
Figure 1-13. Global Offshore Wind Plant Hub Heights over Time
Note: Plant hub heights are shown for the year each project reached completion. Multi-phase projects were
combined to show a single hub height and are reported for the latest year turbines were added.
Source: Navigant analysis of data provided by NREL and BTM
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Figure 1-14. Global Offshore Wind Plant Rotor Diameter over Time
Note: Rotor diameters are shown for the year each project reached completion. Multi-phase projects were
combined to show a single rotor diameter and are reported for the latest year when turbines were added.
Source: Navigant analysis of data provided by NREL and BTM
Various improvements to blade technologies, including manufacturing processes, design configurations,
and use of innovative materials, have enabled the increase in rotor diameter over time that is shown in
Figure 1-14. These longer blades have played a key role in enabling manufacturers to build larger
machines (see Figure 1-12) and have contributed to the higher capacity factors observed for offshore
wind projects (see Figure 1-11).
As with turbines, Navigant expects average rotor diameters to continue to scale upward; in 2012 and
2013, a number of wind turbine manufacturers announced the fabrication and testing of blade
prototypes that exceed the previous record of 61.5 meters. In 2012, Siemens and Alstom began testing
blades for their 6-MW machines on test turbines at land-based sites. These blades reach approximately
75 meters in length and correspond to rotor diameters exceeding 150 meters. The Siemens blade uses a
glass-reinforced epoxy resin with an innovative, one-piece manufacturing process. The blade designed
by LM Windpower, the Alstom machine’s supplier, employs glass-reinforced polyester resin, which the
manufacturer suggests offers improved infusion and curing characteristics relative to epoxy resin
(Siemens 2012; de Vries 2011). Interestingly, neither of these record-breaking blades incorporates carbon
fiber into its design.
In 2013, Mitsubishi, Vestas, and Samsung began testing blades that exceed 80 meters for their next
generation of 7-MW and 8-MW machines. The Mitsubishi blade, developed by Euros, incorporates
carbon-reinforced epoxy resin into its design (to reduce weight) and innovative core materials gleaned
from the aerospace industry (de Vries 2013a). Vestas has also chosen to use carbon in its blade design,
having switched to an innovative structural shell design philosophy (rather than the conventional
internal spar structure) wherein the blade shell absorbs structural loads (de Vries 2013b). The Samsung
Offshore Wind Market and Economic Analysis Page 28 Document Number DE-EE0005360
blade, developed by SSP Technology, also uses carbon and holds the current record for the longest blade
ever produced at 83.5 meters, corresponding to a 171.2 meter rotor diameter (SSP Technology 2013).
Blade Dynamics, based in the Isle of Wight, is pushing even further with a conceptual 100-meter blade
design. This design will employ carbon fiber and will use a structural shell. Blade Dynamics claims that
these features will reduce weight by 40 percent relative to a conventional glass fiber blade. The company
has also developed an innovative manufacturing process wherein blades are constructed in small
modules rather than in single lengths, a process it claims will reduce costs and increase quality. Blade
Dynamics recently won a £15.5-million investment from the Energy Technologies Institute in the United
Kingdom to mature the technology and plans to develop a prototype by year-end 2014 (Blade Dynamics
2013).
1.4.3.3 Drive Train Characteristics
The shift to more distant locations and larger capacity turbines, along with a desire to minimize tower
top mass, has contributed to innovations in drive train configurations. As shown in Figure 1-15, offshore
wind turbines have historically used a conventional drive train design, incorporating a fast-speed,
asynchronous generator (i.e., an induction generator) and a three-stage gearbox.
Figure 1-15. Share of Cumulative Installed Offshore Wind Capacity by Drive Train Configuration
(through 2012)
Source: Navigant analysis of data provided by NREL and BTM
These machines, however, have experienced a number of failures linked to their gearboxes. The costs of
addressing these faults and breakdowns are exacerbated by the difficulties of accessing open-ocean sites,
the costs of vessels required to perform replacements, and the revenues lost to turbine downtime. As a
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result, manufacturers and developers are seeking more robust drive train configurations. In the past few
years, increasing interest in direct-drive turbines, which eliminate the gearbox altogether, has been
somewhat tempered by limited supply and price volatility for several rare earth metals that are key
components of the large permanent magnet generators (PMGs) most often used in such configurations.
By the end of 2012, only 100 MW of direct-drive generators had been installed offshore, at China’s
Rudong Inter-tidal Project (40 Goldwind 2.5-MW turbines).
A second potential solution to the drive train reliability issue lies in a medium-speed generator-gearbox
configuration, which uses fewer gearbox stages than a conventional, fast-speed generator and fewer
PMGs than a direct-drive configuration. These medium-speed generator configurations result in a lower
number of rotations, thereby reducing the relative wear on the drive train and turbine. By year-end 2012,
only 60 MW of cumulative medium-speed generator capacity had been installed at offshore wind sites,
including six of AREVA’s M5000-116 (5-MW) turbines at Denmark’s Alpha Ventus site and ten of
WinWind’s WWD-3 (3-MW) turbines at Sweden’s Vänern Gässlingegrund site (all installed in 2009).
Developers’ desire to reduce overall cost of energy through turbine design and selection comprises three
key drivers:
» Higher-rated capacity to increase energy capture and reduced balance of plant costs
» Higher reliability to minimize the need for corrective maintenance and increase turbine
availability
» Lighter weight to reduce the cost of the support structure and lower lifting requirements during
installation
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Turbine manufactures have responded by developing new offshore wind turbine models in a bid to
capture a greater share of the growing market. A key challenge emerges when attempting to scale
conventional high-speed machines to the envisioned capacities without significantly increasing top-head
mass. This factor in particular has driven manufacturers (including those who have historically relied on
high-speed architectures) to adopt alternative drive systems as the basis for designing next-generation
turbine platforms. Table 1-3 summarizes the five main categories of drive systems currently under
development.13
Table 1-3. Segmentation of Wind Turbine Drivetrain Architectures
Category Description
High Speed
Drivetrain design incorporates a 3-stage mechanical gearbox; ratio generally
greater than 60:1; designs typically coupled with asynchronous induction or
doubly fed induction generators
Medium Speed Drivetrain design incorporates a 2-stage mechanical gearbox; ratio generally
between 2:1 and 59:1; designs typically use permanent magnet generators
Direct Drive Drivetrain design does not incorporate a gearbox (ratio of 1:1); designs
typically use permanent magnet generators
Hydraulic Drive Drivetrain design incorporates a hydraulic gearbox; designs typically use
synchronous generators
Distributed or
Hybrid Drive
Drivetrain design incorporates a mechanical or hydraulic/mechanical gearbox,
with multiple output shafts connected to an equal number of generators (i.e.,
Clipper Liberty 2.5 MW)
Source: Navigant analysis
Among these configurations, hydraulic drives represent the newest (and least-tested) innovation and
seek to address the challenges of increasing turbine size in a different way. In essence, the objective of
the hydraulic drive design is to separate the rotational speed of the rotor from that of the generator,
subsequently enabling the use of standard synchronous generators without the need for a frequency
converter. If the design uses a high-voltage generator, the need for a transformer is also negated. This
configuration potentially allows for the elimination of components most susceptible to failure while
reducing the turbine top mass (BTM Consult 2012).
13 For a detailed technical discussion of these potential drive train configurations, see BTM Consult 2012.
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Hydraulic drives have yet to reach commercialization either in land-based or offshore turbines; however,
Mitsubishi began testing its Digital Displacement Transmission hydraulic drivetrain in a modified 2.4-
MW MWT100 machine in January 2013 (Mitsubishi 2013). Figure 1-16 illustrates the evolution of drive
train systems for offshore wind turbines, highlighting the parallel trends in increasing turbine capacity
and changing drivetrain configurations since 2000.
Figure 1-16. Offshore Wind Turbine Prototypes by Drivetrain Configuration and Year of First
Offshore Deployment
0
1
2
3
4
5
6
7
8
9
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Rat
ed
Cap
acit
y (M
W)
First Deployment Offshore
High Speed Medium Speed Direct Drive Hydraulic Drive
Note: Deployments after 2012 based upon wind turbine manufacturers’ announced schedules.
Source: NREL data
As shown, the average size of next-generation machines aligns with the continuing trend toward larger
turbines. The wide spread of rated capacity (between 3 MW and 8 MW) for turbines currently under
development reflects manufacturers’ divergent design approaches and internal philosophies for how
best to meet customer demands while minimizing manufacturing costs. With each architecture offering
its own set of advantages, the diversity of proposed solutions suggests that an optimal approach for
offshore machines has yet to be established.
1.4.4 Support Structure Trends
Site-specific factors driving the selection of a substructure design for offshore wind projects include the
predominant water depth, the static and dynamic loads that the turbine generates, metocean conditions
(especially extreme events), and sea bed conditions. The move to deeper water, the increasing size of
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turbines, and the increased severity of wind and wave loading at offshore wind projects all pose
increasing technical challenges for developers. These challenges, along with the persistent pressure to
reduce cost of energy, are driving innovations in substructure designs, including several alternatives to
the conventional monopile approach. Figure 1-17 summarizes the relative market share of each
substructure type (based on number installed) for offshore wind projects installed through the end of
2012.
Figure 1-17. Substructure Types for Completed Offshore Wind Projects (through 2012)
Note: Percentages are based on the number of turbines using each substructure technology.
Source: Navigant analysis of data provided by NREL and BTM
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Figure 1-18 illustrates the same metric (i.e., cumulative units installed) over time for completed offshore
wind projects. As shown, the general trend toward diversification of substructure types continued in
2012 and 2013. Alternatives to the monopile and gravity-based approaches, however, have only seen
limited deployment since 2009, with a total of 350 units installed through the end of 2012 (out of an
overall 1,725 units globally). This includes two full-scale prototype floating foundations, one at
Norway’s Hywind site (a 2.3-MW turbine located 7.5 miles from shore in over 200 meters of water) and
another at Portugal’s Windfloat site (a 2-MW turbine located three miles from shore in 48 meters of
water). Given the diversity of possible design conditions, it is unlikely that a single optimal substructure
solution will arise.
Figure 1-18. Substructure Types for Completed Offshore Wind Projects by Year Installed
Note: Based on the number of turbines using each substructure technology.
Source: Navigant analysis of data provided by NREL and BTM
As noted above, monopiles (which are typically large steel pipes with diameters between 3 and 7 meters)
have historically dominated the offshore wind market, accounting for approximately 75 percent of
installed capacity. While monopiles will likely retain a leading market share over the next five years, the
increasing complexity of offshore wind project locations and the increasing size of turbines suggest that
alternative substructure configurations will become an increasingly attractive option. Some suppliers
have suggested that “super-size” or “XL” monopiles, with diameters of 10 meters or more, might allow
monopiles to serve as an economic solution for projects in deeper waters and/or with larger turbines. In
Offshore Wind Market and Economic Analysis Page 34 Document Number DE-EE0005360
2013, EEW Special Pipe Construction, a major monopile supplier, purchased and demonstrated new
fabrication equipment capable of rolling 10-meter diameter piles (Snieckus 2013). However, these larger
monopiles have not yet been tested, and the economics remain uncertain. Such large piles will likely
pose new challenges for installation, given their size, weight, and diameter, which exceed the capabilities
of available piling hammers (IHC Merwede 2012).
Gravity-base substructures represent the second most prevalent type of substructure, with a market
share of approximately 15 percent. However, the popularity of gravity bases has recently declined; the
48-MW Kårehamn offshore wind project is the only project currently under construction that will deploy
gravity-base foundations. Recent experience suggests that conventional gravity-base designs may
encounter difficulties in water depths greater than 15 meters, due to several key challenges. These
challenges include long fabrication durations to allow curing of concrete, high dredging requirements to
achieve precise seabed preparation, reliance on expensive heavy-lift vessels, and the high sensitivity of
installation schedule to weather conditions. For example, the C-Power consortium selected gravity-base
foundations for the 30-MW pilot phase of the Thorton Bank project, which is located in 27-meter-deep
water and features 5-MW turbines. After experiencing initial challenges with these gravity-base
substructures, C-Power opted instead for jacket foundations for the remaining 295 MW (Peire et al 2009).
That said, several companies continue to work on promising new concepts to address these fabrication
and installation challenges, including both self-floating designs and specialized vessel concepts (LORC
2011).
For sites in deeper water (from 30 m to 60 m), developers have typically shown a preference for space-
frame designs (e.g., jackets and tripods). Jacket structures derive from the common fixed-bottom
offshore oil rig design, relying on a three- or four-sided framed structure that is “pinned” to the seabed
using four smaller pilings, with one in each corner of the structure (EWEA 2011; Chapman et al. 2012).
The tripod structure utilizes a three-legged structure assembled from steel tubing with a central shaft
that consists of the transition piece and the turbine tower (EWEA 2011). Like jackets, the tripod is also
pinned to the seabed with smaller pilings. The tripile, a related foundation type, uses three pilings tied
together by a central transition piece above the surface of the water (EWEA 2011). Of the three, jackets
entail significantly more fabrication and assembly, but are less material intensive than either tripod or
tripile designs (EWEA 2011). Experience gained through deployment has shown pre-piled jackets have
been much less costly to deploy than either tripods or tripiles.
Offshore Wind Market and Economic Analysis Page 35 Document Number DE-EE0005360
Several innovative support structure designs under development aim to provide cost-effective solutions
to the increasingly demanding site conditions that are associated with new offshore wind project
developments. A selection of such designs is summarized in Table 1-4.
Table 1-4. Selected Offshore Wind Foundation Designs under Development
Concept Designer Design
Depth Key Advantages Status
Twisted Jacket
Keystone
Engineering
(USA)
30 to 60 m.
Simpler fabrication; less steel than
regular jacket; reduced transport
and installation requirements
Demonstration –
Hornsea Met
Mast
Suction
Bucket
Monopile
Universal
Foundation
(DK)
30 to 60 m. Simple fabrication; less steel than
regular monopile; no piling
Demonstration –
Dogger Bank
Met Mast
Tri-bucket
SPT Offshore
and Wood
Group (DK)
30 to 60 m. No piling; new installation concept;
quayside integration of turbine
Demonstration –
Hong Kong Met
Mast
GBF Gravity
Structure
Gifford/ BMT/
Freyssinet
(U.K.)
30 to 45 m.
Concrete structure; new installation
vessel; quayside integration of
turbine
Concept
Hexabase Thyssen
Krupp (DK) 30 to 60 m.
Less steel than regular jacket;
standard pipe dimensions;
automated fabrication; small piles
simplify installation
Concept (DNV approved)
Note: Design depth refers to the range of water depths for which the foundation design is intended.
Source: Carbon Trust 2012, Wind-Kraft Journal 2012
While a great deal of offshore wind resource remains to be developed at depths amenable to fixed-
bottom foundations, interest in floating offshore foundations continues to grow. In addition to the
material requirements and complex and variable installation requirements of fixed-bottom foundations,
even greater wind resources exist at water depths exceeding 50 to 60 meters. Unfortunately, the offshore
wind industry knows relatively little about the long-term cost implications of moving to floating
offshore platforms. The technology, which is still in its infancy, will likely require several more years of
design and testing before it reaches commercial viability and large-scale deployment. These
demonstration-scale projects include several of the DOE ATD projects described in Section 1.2.3. Two
other notable projects are described below.
The most near-term floating demonstration project is the Fukushima Floating Offshore Wind Farm
Demonstration Project, which is sponsored by the Japanese Ministry of Economy, Trade and Industry
(METI). The first phase of this project is scheduled to be completed by the end of 2013. It will encompass
the deployment of a 2-MW Hitachi wind turbine on a floating, semi-submersible foundation designed by
Mitsui, as well as the world’s first floating substation, which will transform power to 66 kV for export.
The second phase of the project is scheduled for 2014 and 2015, with plans to deploy two 7-MW
Mitsubishi turbines on floating platforms (Bossler 2013).
Offshore Wind Market and Economic Analysis Page 36 Document Number DE-EE0005360
A second notable demonstration project is the Wave Hub demonstrator, which is funded by the Energy
Technologies Institute (ETI) in the United Kingdom. It includes an initial $6-million engineering study of
a 6-MW, direct-drive Alstom turbine, coupled with the Pelastar Tension Leg Platform designed by
Glosten Associates. Based on the initial study, ETI is prepared to commit up to $33 million to fund the
construction and deployment of the integrated system off the southern coast of the United Kingdom as
early as 2015, likely making it the first global deployment of a tension leg platform (Glosten Associates
2013).
If successful, floating offshore foundations offer the potential for less foundation material relative to
deep-water, fixed-bottom foundations, as well as greatly simplified installation and decommissioning.
Each of these attributes could support lower costs moving forward. Reductions in material also help to
incrementally decrease the impact of variable commodity prices, while smaller anchors and reduced
seafloor disruption could lessen potential environmental impacts.
In the United States, most projects have yet to commit firmly to a specific substructure type. As in other
global regions, water depth and seabed soil conditions will play a key role in determining the optimal
design for each project. While the Cape Wind project has reiterated its plan to use monopiles, it has not
yet committed to a supplier. Deepwater intends to use a jacket design for its five-unit Block Island
Offshore Wind project, as does Fishermen’s Energy for the six-unit, first phase of its New Jersey project
development. As noted in Section 1.2, the University of Maine (in partnership with the DOE) installed a
1/8-scale pilot floating turbine on a concrete, semi-submersible hull in June 2013.
1.4.5 Electrical Infrastructure Trends
The offshore wind industry faces a number of regulatory transmission planning issues in order to
deliver power to load centers. The ambitious offshore wind development plans for many countries will
necessitate the construction of significant offshore transmission infrastructure as well as onshore
network upgrades, as some interconnection points may be a significant distance inland. As a result,
several current initiatives, both industry- and government-driven, aim to create shared offshore
transmission infrastructure. These initiatives include the following:
» In 2009, the United Kingdom’s Department of Energy and Climate Change (DECC) and Office of
the Gas and Electricity Markets (Ofgem) established a licensed regulatory regime for offshore
transmission similar to the onshore grid. The regime established Offshore Transmission Owners
(OFTOs), who will be selected through a competitive tendering process and will receive a steady
income stream for a period of 20 years. The regime is expected to generate £15-20 billion in
investment in offshore transmission infrastructure between 2010 and 2020 (DECC 2010).
» In Germany, Transmission System Operators (TSO) are required to build out offshore
transmission systems to connect projects to the land-based grid. In many cases, due to decisions
to site offshore wind projects up to 50 miles from shore, the TSOs are selecting configurations
that use high-voltage direct current (HVDC) technology to connect clusters of projects to the
grid. Several of these projects have been delayed, due to technical complexity and supply chain
Offshore Wind Market and Economic Analysis Page 37 Document Number DE-EE0005360
issues, which has subsequently led a number of developers to freeze investment in the market
(Andresen and Nicola 2012).
» In December 2009, nine nations bordering the North Sea signed the declaration for the North
Seas Countries’ Offshore Grid Initiative. The declaration set the objective of coordinating the
technical, market, political, and regulatory components of offshore electricity infrastructure
development in the North Sea region.
» In the United States, several companies are trying to proactively address transmission
limitations to avoid additional slowdowns for the undeveloped U.S. offshore market. In October
2010, Good Energies, Google, and Marubeni announced investment in a $5-billion, 250-mile
offshore transmission backbone along the Atlantic coast of the United States (Malone 2010).
FERC awarded the project a return on equity of 12.59 percent, conditional on the project being
included in PJM’s regional transmission expansion plan (RTEP) (FERC 2011).
Offshore Wind Market and Economic Analysis Page 38 Document Number DE-EE0005360
The electric infrastructure for offshore wind projects has historically consisted of a medium-voltage
array cable system to collect power from the turbines, an offshore substation to increase power from
medium to high voltage, an export cable system to deliver power to shore, and onshore electric
infrastructure to connect with the electric power grid. Small projects and projects located close to shore
sometimes avoid offshore substations by exporting power at the array voltage. Trends in electrical
infrastructure layout and configuration have remained relatively constant thus far. Figure 1-19 shows
array cable and export cable system voltages plotted against the rated capacity of each operating global
offshore wind project.
Figure 1-19. Array and Export Voltages for Offshore Wind Projects
Source: NREL data
Figure 1-19 reveals that the majority of offshore wind projects have selected 33-kV array cable systems to
collect power from substations. Historically, these arrays have been composed of radial strings
connected in series to the substation. However, this layout means that if a fault occurs in the cable, all
cables behind the fault are unable to export power to the grid, which can result in significant lost
revenues. Many industry watchers have suggested that alternative, redundant designs, such as ring
configurations, could deliver improved reliability and increased revenue. The ring array concept is being
demonstrated for the first time at the Riffgat offshore wind project in Germany (Riffgat Offshore
Windpark 2013).
The number of turbines that can be included on each array cable string is predominately driven by
turbine capacity. For example, while approximately eleven 3.6-MW turbines could be connected on a
Offshore Wind Market and Economic Analysis Page 39 Document Number DE-EE0005360
typical 33-kV cable, this cable could only accommodate seven 6-MW machines.14 As turbine capacities
increase and array cable configurations evolve to incorporate greater redundancy, developers will likely
shift to higher voltage array cables rated at approximately 66 kV.
High-voltage export cables have been used for the majority of offshore wind projects that exceed 100-
MW rated capacity. By accommodating more power per cable, high-voltage cables reduce the overall
number of cables required for a project. High-voltage systems also provide for lower electrical losses,
which can result in increased revenue. The benefits of higher voltage generally become more
pronounced as distance to the point of interconnection increases. As shown in Figure 1-18, no clear trend
exists to suggest that export cable voltages are increasing with larger project capacities. Rather, it seems
that country-specific conventions have been the major driver of export voltage; data suggests that
projects in the United Kingdom generally use 132-kV, high-voltage alternating current (HVAC) export
cables, while projects in Germany, Belgium, Denmark and the Netherlands prefer 150-kV HVAC cables.
The 400-MW Anholt project in Denmark is using 230-kV export cables, which are the highest-voltage AC
cables currently planned for an offshore wind project.
Despite the higher initial costs discussed in Section 1.3, distant offshore projects (located more than 50
miles offshore) have increasingly shown a preference for high-voltage direct current (HVDC) lines,
which offer even lower transmission line losses. Such line loss reductions are particularly valuable for
larger, high-production facilities. Continued evolution of HVDC conversion technology and
development of the high-voltage cable supply chain are expected to push HVDC costs lower in the
future. Improvements in cable-laying vessels, including replaceable cable reels, increased marine cable-
laying capacity, and innovative trenching equipment, might also offer electrical infrastructure cost
reductions.
Innovations in offshore substations and converter stations continue to move slowly. Notably, some
designers have opted for self-floating, self-installing platforms that they can tow to the project site and
install without the use of a heavy floating crane vessel. While such designs generally have a much higher
steel weight and fabrication cost than conventional substations, avoiding the high mobilization costs and
day rates associated with large floating crane vessels may make them less costly in the end.
1.4.6 Logistical and Vessel Trends
While little has changed in installation and vessels trends since the last edition of this report, such issues
will play a key role in the developing U.S. offshore wind market. This section focuses in particular on the
availability of the vessels required to develop and construct offshore wind farms, which could represent
a potentially limiting factor for the growth rate of the U.S. offshore wind market. The offshore wind
project life cycle includes four general phases: pre-construction, construction, project O&M, and
decommissioning. Each of these phases comprises various types of services, each typically requiring a
unique type of vessel. Table 1-5 highlights the more than 17 different types of vessels that may be needed
at various points in the offshore wind life cycle.
14 Assumes a cable cross-section of 1,000 thousand circular mils (kcmil), or 500 mm2.
Offshore Wind Market and Economic Analysis Page 40 Document Number DE-EE0005360
Table 1-5. Vessel Types Required for Each Offshore Wind Project Phase
Vessel Type
Pre-construction (Phase 1) Construction (Phase 2) O&M
(Phase 3) Decommissioning (Phase 4)
En
vir
on
men
tal
Su
rvey
Geo
tech
nic
al
Su
rvey
Geo
ph
ysi
cal
Su
rvey
Inst
alla
tio
n o
f
Met
Mas
t
Tu
rbin
e
Fo
un
dat
ion
Inst
alla
tio
n
Tu
rbin
e
Inst
alla
tio
n
Co
nv
erte
r
Sta
tio
n
Inst
alla
tio
n
Cab
le
Inst
alla
tio
n
O&
M R
ou
tin
e
and
Ov
erh
aul
Tu
rbin
e
Dec
om
mis
sio
n
Su
bst
atio
n
Dec
om
mis
sio
n
Met
Mas
t
Dec
om
mis
sio
n
ROV Support Vessel ●
Geotechnical Survey Vessel ●
Geophysical Survey Vessel ●
Multi-purpose Survey Vessel ● ● ●
Jack-up Barge or Vessel ● ● ● ● ● ●
Heavy Lift Vessel ● ● ● ● ● ● ●
Construction Support Vessel ● ● ● ● ● ● ●
Inter-array Cable Installation Vessel ●
Export Cable Installation Vessel ●
Tugboat ● ● ● ● ● ● ● ●
Service Crew Vessel/Boat ● ● ● ● ●
Diving Support Vessel ● ● ● ●
Safety Vessel/Standby ERRV ● ● ● ●
Multi-purpose Project Vessels (MPPV) ● ● ● ● ● ●
Tailor-made O&M Vessel ●
Accommodation Vessel ● ● ●
Multi-purpose Cargo Vessel (MPV) Primarily provide the inbound services for wind turbine and BOP related tasks
Source: BTM Consult - A part of Navigant – August 2013
Offshore Wind Market and Economic Analysis Page 41 Document Number DE-EE0005360
Table 1-6 shows the global distribution of different service vessel types currently in operation with a
track record of serving offshore wind projects. The numbers are based on the region associated with each
vessel’s flag. Notably, Europe plays a leading role in each vessel category, while other regions show
potential deficits in current vessel availability. Despite the identification of some vessels in both Asia
Pacific and North America, their primary use is for project construction. At present, no project crew
transfer boat or vessel has been recorded in regions outside of Europe.
Table 1-6. Availability of Different Vessel Types with Track Record of Serving the Offshore Wind
Industry by Region (Based on Vessel Flag) as of 2013 (In-operation only)
Vessel Type/ Region Total World Europe Asia Pacific North America Rest of world
Accommodation Vessel 8 5 1 2 0
Cable Laying Vessel 66 53 7 5 1
Construction Support 25 17 3 4 0
Diving Support Vessel 4 1 0 2 1
Heavy Lift Vessel 29 14 11 4 0
Jack-up Barge or Vessel 48 28 6 12 0
MPPV 63 52 2 8 1
MPV 14 7 0 6 1
Service Crew Boat/Vessel 83 82 0 0 0
Safety/Standby EERV 11 10 0 1 0
Survey Vessel 15 11 1 3 0
Tugboat 32 28 2 1 0
Note: Only includes vessels with a track record of serving the offshore wind industry (i.e., that can be linked to a
specific project) and those presently in operation. Not all North American region boats are U.S.-flagged.
Source: BTM Consult - A part of Navigant - September 2013
While noteworthy, this potential vessel supply situation will likely ease over time, as the long lead times
and relatively slow ramp-up of the U.S. market will provide vessel owners and manufacturers the
opportunity to respond to shifting market needs by repurposing existing vessels or constructing new
ones.
As global demand for vessels to serve the offshore wind market has increased, vessel suppliers and
construction teams have sought to address the desire to reduce the time required for installation and for
transferring foundations, towers, turbines, and blades to sites farther from shore. These advancements
have been aided by the increased use and development of more innovative jack-up vessels. New
generation jack-up vessels generally have the following characteristics:
» Increased deck space to facilitate storage of larger numbers of turbine components per trip
» Larger crane capacities (i.e., lifting capacity typically greater than 1,000 metric tonnes and hook
heights in excess of 105 meters) to lift increasingly large turbine and substructure components
» Advance dynamic positioning (DP2) systems to increase operational efficiency and safety
» Longer jack-up legs to enable lifting operations in deeper waters
Offshore Wind Market and Economic Analysis Page 42 Document Number DE-EE0005360
» Ability to carry out operations in harsh open-ocean conditions (i.e., wave height limit of at least
two meters) to minimize construction downtime
Historically, jack-up vessels have represented the primary means for installing offshore turbines and
foundations. As identified in the last edition of this report, some turbine suppliers and project owners
are seeking to hedge against the potential future scarcity of such vessels by building their own vessels or
entering into strategic relationships to secure access to them. This trend appears to be continuing, as
evidenced by the following:
» DONG Energy and Siemens jointly own the offshore vessel operator A2Sea
» RWE has built two jack-up vessels to install its own offshore wind projects
» REpower is currently building two jack-up vessels; the first should be available in 2013 and the
second in 2014
» Areva Wind has a long-term charter on the HGO Infrasea Solutions Innovation
This approach allows suppliers and project owners to avoid potential bottlenecks based on jack-up
vessel availability. It also provides assurance that they can meet their construction and operation
obligations and improves their responsiveness to major O&M activities.
As indicated in this report’s previous edition, U.S. projects and developers face an additional key
consideration in their need to comply with the Jones Act (also known as the Merchant Marine Act of
1920).15 The Jones Act prohibits transfer of merchandise between “points in the U.S.” unless the owner
and crew of the vessel are American as certified by the Secretary of Transportation. However, the
Secretary may approve the use of non-certified vessels upon a finding that no U.S. vessel is suitable and
reasonably available for transportation of a “platform jacket” for an offshore wind farm.16 Currently,
existing specialist vessels capable of offshore foundation and turbine installation are mostly European-
owned and are in high demand for European projects, but there are some plans to construct jack up
barges in the U.S. for construction of offshore wind farms.
While developers may develop near-term strategies for complying with this act despite constraints on
non-U.S.-flagged installation vessels, a thriving U.S. offshore wind market will likely require the
development of a more robust domestic fleet.
15 Section 27 of the Merchant Marine Act of 1920, as amended (46 App. U.S.C. 883).
16 “Platform jacket” is defined as “a single physical component and includes any type of offshore exploration,
development, or production structure or component thereof, including platform jackets, tension leg or SPAR
platform superstructures (including the deck, drilling rig and support utilities, and supporting structure), hull
(including vertical legs and connecting pontoons or vertical cylinder), tower and base sections of a platform jacket,
jacket structures, and deck modules (known as “topsides”). 46 App. U.S.C. 883.
Offshore Wind Market and Economic Analysis Page 43 Document Number DE-EE0005360
1.4.7 Operations and Maintenance Trends
Similar to vessels and logistics, few new developments have occurred in the O&M of offshore wind
farms since the previous report. In general, increased turbine size, plant size, and distance from shore all
have direct consequences on O&M practices, but it is unclear what long-term trends may materialize.
These trends will add to the logistical difficulties of maintaining offshore turbines, particularly as longer
distances from shore increase the challenges in accessing turbines due to weather conditions. As
highlighted in previous sections, the focus on increased reliability, larger turbines, and increased
capacity factors should all contribute to relative reductions in O&M requirements.
Apart from these turbine design considerations, several vessel and logistical trends are emerging in
response to the requirements of more distant offshore wind farms. They include the following:
» Dedicated project crew and accommodation vessels: As wind plant sizes and distances from
shore increase, developers may find justification for dedicating service and crew transfer vessels
to their larger projects. In this case, additional crew vessels may need to be built to keep up with
demand. Plants farther from shore may also require technician crews to reside at
accommodation facilities or large crew vessels for one- to two-week periods. Such vessels may
serve as a more versatile and mobile alternative to fixed hoteling platforms, which allow
technicians to service multiple projects within a general area while reducing transport time and
cost.
» Purpose-built equipment. Particularly for larger plants, developers will need to consider
whether to buy, lease, or share each type of equipment or vessel they will require for long-term
O&M. The breakeven point for justifying the purchase of a dedicated, purpose-built lifting
vessel is approximately 100 turbines (including the use of the vessel during the construction
period). In the future, owners and operators of large wind farms will increasingly demand such
purpose-built vessels for O&M, and in some cases tailor made for their own specific climate and
location.
» Proactive maintenance methods. Within the wind industry in general and offshore wind in
particular, there has been movement toward utilizing more proactive maintenance methods
(e.g., condition monitoring, predictive maintenance, etc.) in an effort to preserve availability and
reduce operating costs. Predictive maintenance activities are only performed when there is an
impending need rather than based upon a specified period of time.
» Multi-contracting of O&M services. Over the past few years, there has been a clear shift in the
O&M offerings that turbine manufacturers provide. Offshore wind O&M is now generally
treated in a multi-contract fashion. Turbine suppliers are limiting their risk exposure by focusing
solely on operating and maintaining their turbines and are obligating the owner to contract for
the other services.
» Project owners assume access risk. The inability to access a wind farm due to inclement weather
conditions can have a significant impact on plant availability. In recent O&M service
agreements, the contractual risk associated with accessing the turbines has been assumed by the
Offshore Wind Market and Economic Analysis Page 44 Document Number DE-EE0005360
owner rather than the turbine manufacturer (who is conducting the O&M). This represents a key
shift in scope from earlier turbine O&M service agreements.
1.5 Financing Trends
The wind power market, including land-based wind, has historically faced financing challenges. For the
U.S. land-based market in particular, obtaining financing has not been easy. Prior to the Section 1603
Cash Grant program, the federal tax credit-based incentive mechanism in the United States required the
support of tax equity investors, as fewer companies had sufficient tax liabilities to capture the tax credits.
The relatively small pool of large tax equity investors has grown even smaller since the recent economic
crisis, although it is starting to grow again.
However, the offshore wind industry entails additional risks relative to land-based wind that make
securing financing more challenging. There is additional technology risk, especially with turbines over
5.0 MW, given their relatively short operating history. As projects move farther offshore, technology risk
will also arise from new foundation types and HVDC transmission lines. Weather and supply chain
constraints will add additional construction and operating risk until new mitigation mechanisms are
developed. Furthermore, regulatory risk will exist in some jurisdictions until clearly defined regimes for
permitting and transmission development are established. As a result, lenders charge risk premiums
over the market interest rates for land-based projects to compensate for the project risk they bear.
1.5.1 Rising Capital Requirements
The pursuit of economies of scale in offshore wind farms drives up project sizes. Larger project capacity
and higher per-MW installation costs compared to land-based wind increase the amount of capital
needed. Given the higher per-MW costs of offshore projects, the total cost of offshore wind farms is
already surpassing that of even the largest land-based wind farms.
1.5.2 Utility On-balance Sheet Financing
Most offshore wind projects through 2012 were financed on the balance sheets of their developers,
generally utilities. Through October 2012, 85 percent of cumulative installed offshore wind capacity was
operated by utilities such as DONG Energy, Vattenfall, RWE, and E.ON (BTM 2012). Balance sheet
financing costs less than project financing and is less time-consuming, due to the lack of need for banks
to conduct due diligence. However, the capital requirements for ever larger projects, such as those in
U.K. Round 3, have begun to strain the on-balance sheet financing capacity of these utilities. As a result,
utilities have sought out alternative financing mechanisms.
1.5.3 Project Finance
The continuing economic crisis and the relative immaturity of the offshore market made many investors
more risk-averse, with many banks reducing their exposure to less-established markets. However, the
offshore wind industry appeared to suffer less from the effects of the financial crisis, as sufficient
funding capacity remained available (with the support of multilaterals and export credit agencies) for
well-structured projects. Most banks continue to focus on Western European countries where a number
of offshore wind projects are already successfully operating and where there is relatively strong
government support (e.g., Germany, Belgium and the United Kingdom).
Offshore Wind Market and Economic Analysis Page 45 Document Number DE-EE0005360
A few projects that secured non-recourse financing appeared insensitive to the effect of the financial
crisis. The first offshore wind farm financed with non-recourse debt was the Princess Amalia Wind
Farm (formerly Q7) in the Netherlands in 2006, which began operation in 2008. The C-Power phase 1
project in Belgium in 2007 showed that larger turbines, namely the REpower 5M, were bankable. The
Belwind wind farm, also in Belgium, demonstrated that larger projects—in this case, 165 MW—were
bankable and could be supported through multilateral involvement (e.g., European Investment Bank
[EIB], Eksport Kredit Fonden [EKF], commercial banks, etc.). This project reached financial closing in
2009, in the midst of the financial crisis. The United Kingdom saw its first project financed deal with the
refinancing of Centrica’s Boreas project. This deal involved the participation of 14 banks. C-Power phase
2 and 3 reached financial closing in 2010 and was the first to receive over €1 billion in financing.
Furthermore, the years 2010 and 2011 saw the project financing of a number of German offshore wind
farms. The first deal in Germany was for the 200 MW Borkum West 2 project in 2010. This deal saw the
first financing of Areva’s 5-MW turbines. In 2011, the 288-MW Meerwind project became the first project
to include construction risk for Siemens turbines, the first with a private equity investor, and the first
under the German Development Bank’s (KfW) offshore wind program. Also in 2011, the Global Tech I
wind farm became the first 400-MW project to be financed. More recently, the Butendiek project in
Germany reached financial closing at the beginning of 2013. Since 2011, Germany offshore wind project
development slowed down due to regulatory uncertainties linked to grid connection availability for
future wind farms. This latest transaction came as a positive signal for offshore wind in general, as it
signaled that good projects can overcome these kind of issues and eventually complete the financing
process.
2012 was a booming year for the U.K. offshore wind market, with more than 530 MW (Lincs, 270 MW;
Gunfleet Sands, 172 MW; and Walney, 92 MW) of projects financed on a non-recourse basis. In
particular, the Walney project was the first non-recourse refinancing of a minority share on the basis of
commercial project financing terms. This structure is unique in the sense that the project financing is not
at the project level (where the producing assets are), but rather one step above at the shareholder level.
The purpose of this structure was to broaden the universe of potential buyers of minority shares in
operational wind farms to include players who need the debt financing to reduce the size of their equity
commitment and/or increase their equity returns. Such structures could be replicated on future
transactions.
1.5.4 Multiparty Financing
While a single entity finances most land-based wind farms, the multibillion-dollar offshore projects
generally involve co-investment by consortia for risk-sharing and pooling of resources and expertise.
Seven of the nine Round 3 development zones in the United Kingdom were awarded to consortia. The 9-
GW Dogger Bank Zone was awarded to a consortium of four large utilities. Similarly, projects that have
secured project financing (rather than balance sheet financing) have also generally done so through
consortia of many banks and other institutions. The previously mentioned Meerwind project involved
seven commercial banks and a private equity firm, as well as an export agency and a development bank.
Offshore Wind Market and Economic Analysis Page 46 Document Number DE-EE0005360
1.5.5 Importance of Government Financial Institutions
For larger projects, the support of government or quasi-government agencies has long been critical. Most
offshore projects that have been project financed in Europe have received support from some
combination of the EIB; the Danish export credit agency, EKF; the German export credit agency, Euler
Hermes (EH); and, most recently, the Green Investment Bank (GIB) in the United Kingdom. The export
credit agencies could facilitate the financing of U.S.-based projects by supporting turbine manufacturers,
such as Vestas, Siemens, and REpower.
The availability of €5 billion from the KfW has facilitated financing for offshore wind projects in
Germany. This financing complements other sources, such as the EIB, export credit agencies, and
commercial banks. The proposed Meerwind wind farm, mentioned above, is the first offshore project to
reach financial closing under the KfW’s program. The project is unique in that it did not include EIB
funding.
In 2012, the 367-MW Walney project in the United Kingdom became the first project to receive funding
from the United Kingdom’s GIB. The bank contributed approximately one-fifth of the amount needed
for the refinancing of the project.
As the offshore wind market matures, it will require less help from public finance institutions. In 2012,
the 270 MW Lincs project in the United Kingdom received financing from a group of 10 commercial
banks but did not leverage a public finance institution.
1.5.6 New Financing Sources
As the offshore wind sector matures, new investors, such as infrastructure and pension funds, private
equity groups, and other strategically-minded corporations, are demonstrating interest. These investors
have typically purchased minority stakes in operating projects, thus avoiding construction risk. DONG
Energy has been the primary “seller” of these minority stakes.
In 2009, EIG Global Energy Partners (formerly TCW Energy), an infrastructure fund, purchased a 50
percent stake in a subsidiary of Centrica, which owned the Lynn (97 MW) and Inner Dowsing (97 MW)
projects in the United Kingdom. In 2010, Dutch pension fund PGGM joined Ampere Equity Fund to
purchase a 24.8 percent stake in the United Kingdom’s Walney project. DONG again sold off a minority
stake of a project in 2011, when it sold 50 percent of the Anholt project to two Danish pension funds,
PensionDanmark (30 percent) and Pensionskassernes Administration (PKA, 20 percent).
The previously mentioned Meerwind project in Germany included financing from Blackstone, a U.S.-
based private equity firm. Previously, no private equity funds had been used in offshore wind projects.
Other non-traditional offshore wind investors have entered the market as well. In November 2011, the
Japanese trading company Marubeni acquired 49.9 percent of the United Kingdom’s Gunfleet Sands
project from DONG Energy. This deal marked the first financing of a majority stake to date. Marubeni
has shown an increase in its offshore wind activity with the acquisition of Seajacks, a vessel operator, in
March 2012 and a 25 percent stake in Mainstream Renewable Power, an Irish project developer, in
August 2012.
Offshore Wind Market and Economic Analysis Page 47 Document Number DE-EE0005360
In February 2012, DONG Energy sold a 50 percent stake in the 277-MW Borkum Riffgrund I project in
Germany to the parent company of LEGO, a Danish toy company. The company cited ambitious
environmental goals and long-term financial returns as rationale for the investment.
In the summer of 2013, another Japanese conglomerate, Sumitomo, acquired minority stakes in a Belgian
portfolio of two offshore wind farms (totaling 381 MW) from Parkwind for €100 million. The seller is a
holding company jointly owned by an investment company of the Colruyt family and a Flemish
investment firm. Notably, one of the other bidders was IKEA, the Swedish furniture company who
seems to be following the path previously opened by LEGO.
1.5.7 Likely Financing Trends for Offshore Wind in the United States
As independent power producers (IPPs) predominantly drive the development of offshore wind projects
in the United States, offshore developers in the United States are unlikely to self-finance projects through
balance sheet financing and will therefore need access to project financing. The banks likely to
participate in U.S. offshore projects initially will be those European banks that have offshore project
financing experience in Europe. They will likely assess U.S. projects in the same way that they assess
European ones. However, pricing and other market conditions may be subject to the terms of the U.S.
wind project finance market, which at times have deviated from European terms and conditions. Given
the size of proposed offshore wind projects in the United States, the support of government agencies
could be critical, via loans or loan guarantees.
As discussed in Section 2, offshore wind investors and lenders in Europe rely on support schemes that
provide long-term revenue stream stability, either directly through feed-in tariffs (FiTs) or public
payments, such as green certificates, or indirectly through long-term PPAs made possible by the
underlying regime. Projects in the United States to date, such as those in Massachusetts and Rhode
Island, rely upon income received from regulated PPAs that provide a fixed price per MWh produced
that is well above the wholesale price. Another support regime that has been proposed in New Jersey is
the Offshore Wind Renewable Energy Certificate (OREC) system, which, as a “contract for differences,”
is not that different from a FiT. Both systems are expected to be bankable, as they provide sufficient price
support to make projects economically viable. The European experience shows that many different
regulatory regimes can be successful, as long as the overall price level is compatible with the current
installation costs of offshore wind and there is sufficient regulatory stability to cover the relatively long
development and construction process.
1.5.8 Cape Wind Financing
Since the last version of this report, Cape Wind has made inroads in securing financing for what analysts
expect to amount to $2.6 billion. As mentioned in Section 1.2.2.2, in March 2013, the Bank of Tokyo-
Mitsubishi UFJ (BTMU) was engaged as the coordinating lead arranger of the debt portion of financing,
corresponding to commercial banks. Additionally, in June 2013, PensionDanmark pledged $200 million,
which is contingent upon Cape Wind securing its remaining financing needs and beginning construction
by the end of the year.
Offshore Wind Market and Economic Analysis Page 48 Document Number DE-EE0005360
2. Analysis of Policy Developments
This section provides an analysis of policy developments at the federal and state levels with the potential
to affect offshore wind deployment in the United States. It includes a description of policies for
promoting offshore wind and an evaluation of policy examples to close any competitive gaps. The
evaluation employs a systematic approach of defining the offshore program objectives (Section 2.1),
identifying barriers to meeting the objectives (Section 2.2), and evaluating examples of policies to
address the barriers (Sections 2.3 through 2.6). The categories of barriers and policies that are addressed
are summarized as follows:
» Cost competitiveness of offshore wind energy (Section 2.3)
» Infrastructure challenges (Section 2.4)
» Regulatory challenges, including leasing, permitting, and operations (Section 2.5)
» Summary of representative policies (Section 2.6)
The following table summarizes major policy activities that have occurred in 2013 that affect offshore
wind development in various jurisdictions, each of which is discussed in Section 2 or in the appendices.
Offshore Wind Policy 2013 Highlights
» Policies that address cost-competitiveness
o The U.S. PTC and ITC were extended for projects that begin construction by year-end
2013. The 50% first-year bonus depreciation allowance was also extended for one year.
o The U.S. DOE announced seven projects that will receive up to $4 million each to
complete engineering and planning as the first phase of the Offshore Wind Advanced
Technology Demonstration Program.
o The Maryland Offshore Wind Energy Act of 2013 established Offshore Wind
Renewable Energy Credits (ORECs) for up to 200 MW.
o The Maine legislature passed a bill that re-opened the bidding process for ratepayer
subsidies to offshore wind projects.
o The United Kingdom announced the strike prices for land-based and offshore wind
generation through 2019, which should expedite the development of Round 3 projects.
o Spain has made various reductions to its FiT with, in some cases, retroactive effects on
existing projects.
» Policies that address infrastructure challenges
o The New German Energy Act clarifies the compensation that projects impacted by grid
delays are entitled to; that law is expected to resolve the grid construction delays.
» Policies that address regulatory challenges
o BOEM held the first two competitive lease sales for renewable energy in U.S. federal
waters off the coasts of Rhode Island and Virginia.
o Illinois passed the Lake Michigan Wind Energy Act, which requires the Illinois DNR to
develop a detailed offshore wind energy siting matrix for Lake Michigan.
o Denmark initiated feasibility studies for six areas that have been identified for offshore
wind. Denmark also published details of the tender process and the provisional
timetable for 1,500 MW of planned offshore wind power to be installed by 2020.
Offshore Wind Market and Economic Analysis Page 49 Document Number DE-EE0005360
2.1 Offshore Wind Program Objectives
The goals of the U.S. offshore wind program can be broadly defined as promoting the development and
deployment of offshore wind energy systems at competitive prices while aiming to maximize the MW
capacity of manufacturing production in the United States, resulting in more factories and jobs.
Competitive prices are defined by achieving a levelized cost of energy (LCOE) at which offshore wind
can compete with other regional generation sources without subsidies.
The DOE’s 2008 report, 20% Wind Energy by 2030, determined that it is feasible for wind power to meet
20 percent of U.S. electricity demand by 2030, which would require wind power capacity to increase to
over 300 GW (U.S. DOE 2008). The report projects that 54 GW of offshore wind could be installed by
2030, with an average levelized cost of energy (LCOE) of 7¢/kWh. While this level may not be achieved
and the DOE is updating its projections in a new report to be issued in 201417, the DOE’s offshore
program aims to address barriers and minimize the LCOE of offshore wind.
In 2010, the DOE instituted the Offshore Wind Innovation and Demonstration Initiative (OSWInD) to
accelerate the development of commercial offshore wind. The OSWInD Initiative is focused on reducing
the cost of offshore wind energy and decreasing the deployment timeline uncertainty. The DOE sees
offshore wind as a method to reduce the nation’s greenhouse gas emissions, diversify energy supply,
deliver cost-competitive electricity to coastal regions, and stimulate the economy.
The OSWInD initiative will address these objectives through a suite of three focus areas – Technology
Development, Market Barrier Removal, and Advanced Technology Demonstration. This section
discusses market barriers that affect U.S. offshore wind development and the policies that have been
used or considered by various jurisdictions to address those barriers.
17 DOE has announced that its new Wind Vision Initiative includes three major elements:
• A description of the status of wind technology and the wind business, including the state of wind power
today, what has changed since the 2008 wind vision report was published, and an updated credible national
vision for wind power going forward
• A comprehensive assessment of the national and regional impacts (i.e., benefits and costs) of this wind vision,
based on the best available science and other relevant information
• A roadmap describing what needs to be done in order to achieve the vision, including which sectors must
conduct needed activities, by when and in what sequence, and estimates of resources required
Offshore Wind Market and Economic Analysis Page 50 Document Number DE-EE0005360
2.2 Potential Barriers to Meeting the Objectives
There are three high-level barriers that could impact the achievement of the United States’ offshore wind
objectives. These are cost competitiveness, a lack of infrastructure, and uncertain regulatory processes
and timeline. A summary of these is included in Table 2-1 below. Further detail is provided in
Appendix A.
Table 2-1. Key Offshore Wind Barriers
Cost
Competitiveness
High Capital Cost High Cost of Energy Produced by Offshore Wind High Financing Costs Due to Risks
Technical and
Infrastructure
Lack of Purpose-Built Ports and Vessels Lack of Domestic Manufacturing Inexperienced Labor Insufficient Offshore Transmission Infrastructure Insufficient Domestic O&M capabilities
Regulatory Uncertain Site Selection Process and Timeline Fragmented Permitting Process Environmental and Public Resistance
Uncertain Environmental Impacts
Source: Navigant analysis
2.3 Examples of Policies for Addressing the Cost Competitiveness of Offshore Wind
Energy
2.3.1 General Discussion of Policy Examples
As mentioned in Section 2.2 and further described in Appendix A, the high cost of energy produced by
offshore wind is the major contributing factor to the lack of cost competitiveness of the U.S. offshore
wind industry. Support schemes that address cost competitiveness can be divided into “investment
support schemes” (MW-focused) and “operating support schemes” (MWh-focused). Examples of
investment and operating support schemes are listed below. All of these examples have been used in
European countries that are active in offshore wind.
2.3.1.1 Investment Support Schemes
Renewable energy is a capital-intensive industrial sector. Investment support schemes have helped
reduce the burden for project developers and/or manufacturers, via direct or indirect investment
subsidies at the time of construction. These subsidies take the form of the following:
» Cash grants, in which part of the investment is paid through public subsidies. This is the
simplest and most direct mechanism.
» Loans, which are guaranteed by federal or state governments.
» Accelerated depreciation of assets, which leads to higher taxable losses in early years.
Investors with corresponding taxable profits can reduce their tax bills in such years, leading
Offshore Wind Market and Economic Analysis Page 51 Document Number DE-EE0005360
to higher profitability (linked to the tax rate applicable to such underlying taxable profits).
Structures are put in place whereby tax investors (with taxable profits) notionally own the
project at the time of investment and share the tax gains from accelerated depreciation with
the project’s real investors in the form of “tax equity” (i.e., the volume of tax depreciation,
multiplied by the tax rate, minus a profit to the remunerator for the use of taxable income).
» Tax breaks, low-interest loans, credits, or deductions, all of which are various direct or
indirect structures through the tax code amounting to some combination of the above two
mechanisms. In addition, low-interest loans or other incentive mechanisms are provided for
manufacturing to help reduce hardware costs.
The use of each of these mechanisms in Europe is summarized in Section 2.3.3.1.
2.3.1.2 Operating Support Schemes
Operating support schemes are linked to the actual energy production from renewable energy sources.
There are two main philosophies: one whereby the regulator offers a fixed price to renewable energy
producers (volume is therefore uncertain), and one whereby the regulator sets a target volume for
renewable energy production (in which case the value of the support will vary). The latter category is
typically considered to be more market-oriented.
The following mechanisms are the primary operating support schemes currently in use to support
offshore wind:
» Price-driven mechanisms
FiTs
Feed-in premiums
» Quantity-based mechanisms
Green certificates
Tendering
The use of each of these mechanisms in Europe is summarized in Section 2.3.3.2.
2.3.2 Current U.S. and State Policies
2.3.2.1 U.S. Policies
The primary vehicles for addressing the cost competitiveness of offshore wind energy at the federal level
are the Renewable Electricity Production Tax Credit (PTC) and the Business Energy Investment Tax
Credit (ITC). Investors in wind projects can choose between these two incentives as they apply to
projects that begin construction by year-end 2013. Most offshore wind project investors will choose the
ITC (30 percent of initial capital cost) over the PTC (approximately $23/MWh for the first 10 years of
operation), because it offers a relatively larger level of support for offshore wind systems. In 2012, the
U.S. Senate Finance Committee considered an ITC for offshore wind that does not expire until 3,000 MW
are claimed, rather than approving short-term extensions of the ITC, which would not support the multi-
Offshore Wind Market and Economic Analysis Page 52 Document Number DE-EE0005360
year development process of offshore wind. Although this proposal is still advocated in 2013, no further
action has been taken on it.
Other investment support schemes currently in effect at the federal level include the DOE Loan
Guarantee Program and the Modified Accelerated Cost-Recovery System (MACRS) + Bonus
Depreciation. Although the DOE still has authority to issue loan guarantees under Section 1703 of Title
XVII of the Energy Policy Act (EPAct) of 2005, it hasn’t solicited for new Loan Guarantee applications in
several years and is only adjudicating applications that are already pending. The MACRS establishes
five years as the time over which certain renewable energy properties, including wind power, may be
depreciated. In January 2013, the American Taxpayer Relief Act of 2012 (H.R. 8, Sec. 331) further extended
the 50 percent first-year bonus depreciation allowance for property placed in service during 2013.18
2.3.2.2 State Policies
Figure 2-1 and Table 2-2 provide a summary of Renewable Portfolio Standards (RPS), policies, requests
for proposal (RFPs), and related activities to address the cost competitiveness of offshore wind energy in
selected U.S. states. Appendix B provides additional details of these activities.
18 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F&re=1&ee=1
Offshore Wind Market and Economic Analysis Page 53 Document Number DE-EE0005360
Figure 2-1. Summary of Policies to Address Cost Competitiveness in Selected U.S. States
Offshore Wind Market and Economic Analysis Page 54 Document Number DE-EE0005360
Table 2-2. Policies to Address Cost Competitiveness of Offshore Wind in Selected U.S. States
State RPS Offshore Wind RPS Mandatory PPAs RFPs and Other Activity
Delaware 25% by 2025-
2026 350% multiplier for the
Renewable Energy
Certificate (REC) value
of offshore wind
facilities sited on or
before May 31, 2017.
Delmarva Power was directed to
negotiate a long-term PPA with
Bluewater Wind as winner of an
all-resources RFP. However,
NRG-Bluewater Wind failed to
make a substantial deposit to
maintain the PPA.
Projects receive a subsidy from the grid
operator for construction of the export cable.
Maine 40% by 2017
300 MW offshore wind
by 2020; 5000 MW by
2030
Maine Wind Energy Act directed
PUC to hold competitive process
to award 20-year PPAs to
offshore pilot projects
Legislation passed in June 2013 re-opened the
bidding process for PPA for ratepayer
subsidies of offshore wind pilot projects.
U.Maine bid against the Statoil Hywind
Maine floating wind farm which had signed a
term sheet for 27 cents/kWh for 12 MW, but
Statoil withdrew its application in October
2013
Maryland 20% by 2022 The Maryland Offshore
Wind Energy Act of
2013 established ORECs
for up to 200 MW,
limiting ratepayer
impacts while
broadening the cost-
benefit analysis,
including consideration
of peak coincident price
suppression.
Maryland issued an RFP to conduct initial
marine surveys of the offshore WEA that
BOEM identified. Maryland plans to fund
additional surveys with state funds to
encourage development of the WEA by
private developers after the BOEM
competitive auction process.
Offshore Wind Market and Economic Analysis Page 55 Document Number DE-EE0005360
State RPS Offshore Wind RPS Mandatory PPAs RFPs and Other Activity
Massachu-
setts
15% by 2020,
increasing by
1% each year
thereafter with
no stated
expiration
date.
There is no carve-out or
REC multiplier for
offshore wind.19 The
governor has set a goal
of developing 2,000 MW
of offshore wind energy
to help achieve the RPS
requirements.
The Green Communities Act
requires each electric distribution
company to sign PPAs for 7% of
its load with renewable energy
generators. The Department of
Public Utilities (DPU) has
approved contracts with National
Grid and NSTAR utilities for 363
MW or 77.5% of the full potential
output of the Cape Wind project.
New
Jersey
20.38% Class I
and Class II
renewables by
2020-2021
The NJ RPS contains a
carve-out for offshore
wind. The state’s Board
of Public Utilities will
define a percentage-
based target of 1,100
MW of OSW.
New York 29% by 2015 There is no carve-out or
REC multiplier for
offshore wind.
NYPA, LIPA, and Consolidated Edison have
filed an unsolicited request for a lease in
federal waters off Long Island, but two
expressions of competitive interest by
Fishermen’s Energy and EMI have been filed,
and BOEM will launch competitive auction
process after finalizing the lease area borders.
BOEM will also issue a Call for Information
and Nominations for other lease areas off NY.
19 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=MA05R&re=1&ee=1
Offshore Wind Market and Economic Analysis Page 56 Document Number DE-EE0005360
State RPS Offshore Wind RPS Mandatory PPAs RFPs and Other Activity
Rhode
Island
16% by 2019 There is no carve-out or
REC multiplier for
offshore wind.
In 2008, Rhode Island issued an RFP for an
offshore wind project to produce 15% of the
state’s electricity demand and subsequently
signed a Joint Development Agreement with
Deepwater Wind. The Rhode Island Public
Utility Commission approved an initial 30
MW Pilot PPA for 24.4 cents/kWh.20
Virginia Virginia is having the local transmission
system owner conduct interconnection
studies exploring a high-voltage submarine
cable that could interconnect to OSW farms.21
The VA State Corporation Commission could
extend its current general policy to allow
“construction work in progress” costs of
offshore wind development to be collected
from ratepayers prior to completion of an
offshore wind farm.
20 See http://offshorewind.net/OffshoreProjects/Rhode_Island.html 21 See https://www.dom.com/news/2012/pdf/dominion_offshore_public_report_3-13-2012.pdf
Offshore Wind Market and Economic Analysis Page 57 Document Number DE-EE0005360
Public Utility Commission Approval of Power Purchase Agreements
Ultimately, the state public utility commission (PUC) must approve all PPAs22 before the costs can be
passed through to ratepayers. Most states have legislation providing guidance for such approvals that
typically requires the PUC to conduct some form of cost-benefit analysis and determine that the PPA
provides “least cost” energy to warrant ratepayer funding. Lawmakers seeking to address the health and
environmental costs of certain generation fuels have broadened the cost-benefit analysis because
pollution costs are not internalized into the price of the energy produced.
Massachusetts
The Commonwealth of Massachusetts enacted legislation to promote renewable energy by authorizing
the state PUC to approve a renewable PPA if the PPA would achieve the following:
» Provide enhanced electricity reliability within the Commonwealth
» Contribute to moderating system peak load requirements
» Be cost-effective to Massachusetts electric ratepayers over the term of the contract
» Create additional employment in the Commonwealth, where feasible23
The PUC was directed to “take into consideration both the potential costs and benefits of such contracts,
and [to] approve a contract only upon a finding that it is a cost effective mechanism for procuring
renewable energy on a long-term basis.” After reviewing substantial written and oral testimony, the
PUC concluded the Cape Wind project offers unique benefits relative to the other renewable resources
available:
“In particular, the project’s combination of size, location, capacity factor, advanced stage of
permitting, and advanced stage of development is unmatched by any other renewable resource
in the region for the foreseeable future. This combination of benefits will significantly enhance
the ability of [the utility] to achieve renewables [RPS] and greenhouse gas emissions reduction
requirements.”
On appeal, the Massachusetts Supreme Judicial Court upheld the PUC, concluding, “In sum, our review
of the record indicates that there was clearly sufficient evidence of which the department could base its
conclusion that the special benefits of PPA-1 exceeded those of other renewable energy resources, and
we uphold the department’s conclusion that approval of the contract was in the public interest.” The
Court noted the project location near an area that uses high levels of electricity that would not require
22 With the exception of federal procurements of PPAs. 23 Green Communities Act, Section 83, Chapter 169 of the Acts of 2008.
Offshore Wind Market and Economic Analysis Page 58 Document Number DE-EE0005360
long, new, onshore transmission to other generators and the greater capacity factor than generators run
on other types of renewable resources.24
The Court also noted the PUC’s finding that Cape Wind would lower regional energy costs through
“price suppression,” described as “the reduction of wholesale energy market clearing prices that results
from the addition of low-cost generation resources.”25 Cape Wind presented testimony based on an
independent economic analysis by Charles River Associates (CRA) that Cape Wind energy would be
dispatched by the regional transmission operator during peak periods displacing fossil fuel generators
that are more expensive to operate after constructed. CRA concluded that the total savings which would
be spread among all New England ratepayers over the 25 year lifespan of the project could exceed $7
billion.26 Although the PUC only recognized 50 percent of this benefit because the utility purchased 50
percent of the capacity, the benefit to the contracting utility customers was still significant.27
Rhode Island
Rhode Island enacted legislation to promote long term contracts for renewable energy resources
including offshore wind.28 The law requires utilities to hold annual auctions to meet their RPS targets
and may sign 20 year contracts that are “commercially reasonable”. National Grid held an auction and
negotiated a 20 year contract with Deepwater Wind for the Block Island Wind Farm and interconnection
cable for 24.4 cents/kWh plus 3.5% annual escalation. The Rhode Island Public Utility Commission
reviewed the PPA and determined it was not “commercially reasonable” because it was substantially
higher priced than some other renewable resources such as onshore wind. The Rhode Island Legislature
then passed another bill to amend the statute to redefine “commercially reasonable” to mean terms and
pricing that are reasonably consistent with a project “of a similar size, technology and location” and
likely to provide economic and environmental benefits.29 The PUC then approved the same PPA and it
was upheld by the Rhode Island Supreme Court.30
Maryland
The Maryland Offshore Wind Energy Act of 2013 established ORECs and substantially broadened the
cost-benefit analysis for OREC eligibility. The applicant must submit a cost-benefit analysis addressing
employment, taxes, health and environmental benefits, supply chain opportunities, ratepayer impacts
and the long term effect on the energy and capacity markets. The act requires the public utility
commission to consider the ratepayer impacts, potential reductions in transmission congestion costs,
24 Alliance to Protect Nantucket Sound, Inc. & others v Department of Public Utilities, 461 Mass. 166, December 28,
2011.
25 461 Mass. at 176-177. 26 “Update to the Analysis of the Impact of Cape Wind on Lowering New England Energy Prices,” CRA Project No.
D17583-00, Charles River Associates, March 29, 2012 27 461 Mass. at 176-177. 28 Public Law 2009, Chapter 53. 29 Public Law 2010, Chapter 32, amending Title 39 Section 26.1. 30 In re Review of Proposed Town of New Shoreham Project, Case No. 2010-273-M.P., July 1, 2011.
Offshore Wind Market and Economic Analysis Page 59 Document Number DE-EE0005360
potential reductions in capacity prices and locational marginal prices, potential long-term changes in
capacity prices, and the extent to which the cost-benefit analyses demonstrates positive net economic,
environmental, and health benefits when reviewing OREC applications. Therefore, and unlike New
Jersey, the Maryland act specifically requires a price suppression analysis for peak coincident wind farm
generation and evaluation of other electricity market and ratepayer benefits and is thus the most
comprehensive state legislation requiring consideration of all significant economic benefits of a proposed
wind farm. Some of these real economic benefits will accrue directly to ratepayers to offset a portion of
the rate impacts based only on the higher current capital costs of offshore wind in the United States.
Maine
In 2009, the Maine legislature amended the Maine Wind Energy Act to set goals of installing 300 MW of
offshore wind by 2020 and 5,000 MW by 2030.31 The legislature also directed the PUC to hold a
competitive bid and approve PPAs for offshore renewable energy pilot projects that met certain
conditions. 32 Statoil was determined the winner of the auction process and the PUC approved a term
sheet for 12 MW in 2012 at 27 cents/kWh. In July 2013, the Maine legislature revised the statute to
authorize additional bidding and the University of Maine submitted a competing bid in September 2013
which is currently under review by the PUC. As noted above, in October 2013 Statoil announced its
abandonment of its Maine project due to these changes and more general schedule concerns.
Summary of State Policies that Promote Cost-Competitiveness of Offshore Wind
Renewable Portfolio Standards
ME, MA, RI, CT, NY, NJ, PA, DE, MD, NC, MI, WI, IL, IN, OH, CA, OR, WA
Set minimum acquisition requirements for all renewables despite current costs
Carve-outs such as ORECs require OSW acquisition (NJ, MD)
Long Term Power Contracts (ME, MA, RI, DE)
Accommodate up-front capital costs of renewables and likely increase of fossil fuel prices
Provide revenue stream to enable financing of billion dollar offshore wind farms
Construction Work in Progress rate surcharges phase in costs to ratepayers during construction
and spreads total cost over greater period of time for reduced impact
Broad Definition of Benefits for Rate Recovery (ME, MA, RI, NJ, MD)
Incorporation of new jobs, economic and environmental benefits into cost benefit analysis
Inclusion of peak demand coincident wind energy price suppression into cost benefit analysis
recognizes simultaneous real savings to ratepayers from OSW ($7 billion price suppression in
New England for Cape Wind capital cost of ~$3 billion) (MA, MD)
Limits on monthly ratepayer impacts from OSW PPAs prevent excessive, currently over-market
prices being passed onto ratepayers and maintain balance with promoting clean new
technologies with economic development potential (ME, NJ, MD)
31 Maine Revised Statutes Title 35-A §3404. 32 Maine Revised Statutes Title 35-A §3210-C.
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2.3.3 Current Policies in Europe
This section provides an overview of European support schemes for renewable energy and offshore
wind. The European Union (EU) has set the following targets for 2020:
1. Reduce greenhouse gas emissions by 20 percent
2. Reduce primary energy use by 20 percent
3. Generate 20 percent of the electricity with renewable sources
All of the EU member states have committed themselves to these targets and have different support
schemes in place to achieve these ends.
2.3.3.1 Investment Support Schemes
Table 2-3 lists investment support schemes in various EU countries.
Table 2-3. Renewable Energy Investment Support Schemes in Europe
Country Investment Support
Schemes
Comments
Belgium » Grid subsidy Projects with a capacity of 216 MW or more receive a
subsidy from the grid operator (€25 million) for
construction of the export cable. (Smaller projects
received a prorated amount.)
Finland » Cash grant Up to 40% of investment budget
France » Accelerated depreciation
» Research tax credit
Greece » Tax break
» Cash grant
» Leasing subsidies
Total investment incentives up to 40% of investment
budget
Italy » Cash grant Up to 30% of investment budget
Netherlands » Tax break
Poland » Tax break
» Cash grant
Renewable energy is exempt from tax.
Grant from EU structural funds
Spain » Accelerated depreciation Free depreciation of new tangible assets used in
economic activity
Source: European Renewable Energy Council, 2009 and Taxes and Incentives for Renewable Energy, 201133
33 http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Taxes-Incentives-
Renewable-Energy-2011.pdf
Offshore Wind Market and Economic Analysis Page 61 Document Number DE-EE0005360
2.3.3.2 Operating Support Schemes
Feed-in Tariffs
FiTs, which feature a guaranteed price per kWh, are the most frequently used support schemes for
renewable energy in Europe. In most countries, the FiT scheme has evolved into an “advanced tariff
scheme,” whereby the number of years when the FiT applies is limited, ensuring a natural phasing out of
the support scheme. In order to provide security for the investors, the support scheme normally has a
lifespan of between 10 and 15 years. In addition, in some countries the FiT is also limited to a number of
full load hours. Price differentiation between the multiple renewable energy sources takes place in most
countries.
Feed-in Premiums
Few European countries use feed-in premiums, which are guaranteed premiums per kWh, incremental
to the electricity market price. Belgium is probably the best example of feed-in premium use, although it
is technically a green certificate scheme with a floor price. A common criticism of the feed-in premium is
that the feed-in premium regime is susceptible to lobbying, as large industrial power consumers will
lobby more aggressively against such a regime that imposes a surcharge on the price of electricity, which
is largely independent of the price of power.
Green Certificates
Green certificate regimes (where qualifying producers generate tradable certificates, which others must
purchase) have generally been seen as less stable, more complex, and less favorable to investment.
Countries with such regimes have seen investment lag behind countries with FiTs. The main difference
in impact between FiTs and green certificates is that FiTs provide price certainty (i.e., fixed $/kWh to the
wind generator), while green certificates provide volume
certainty (i.e., a fixed amount of wind kWh will be
generated). Furthermore, while green certificate regimes can
work for mature technologies like land-based wind, they do
not really promote diversification of renewable energy
sources without extensive tinkering, which increases
complexity and instability.
The risk profile for green certificates is steeper than for FiTs, due to twin price risk (in both electricity
markets and the green certificates market). This increased risk was obvious during the banking crisis of
2008, when lending in such countries was reduced much more drastically than in FiT countries.
For this reason, Belgium has set a minimum price for the green certificates, thus creating a de facto feed-
in premium. Similarly, Poland imposes the average market price of the previous year, and Romania set a
floor and cap price. Lithuania has committed to use green certificates beyond 2020.
Tendering
Green certificates do not really
promote diversification of
renewable energy sources
without extensive tinkering.
Offshore Wind Market and Economic Analysis Page 62 Document Number DE-EE0005360
With a tendering regime, regulators set volumes of renewable energy production and provide a specific
support regime for that volume over an agreed-upon period, typically via a fixed price or contracts for
differences (CfD) mechanism. Such volumes are offered to investors in a competitive process.
Renewable energy tenders have a bad track record in various European countries, due to the
insufficiency of non-compliance penalties, the lack of competition in the bidding process, long project
lead times, and complex permitting procedures, which tend to be separate from the tender process.
2.3.3.3 Summary of Support Mechanisms Used in Europe
Table 2-4 shows offshore wind capacity that has been installed under various support schemes currently
in use across Europe. Note that a variety of operational schemes have resulted in significant MW
installations.
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Table 2-4. Offshore Wind Capacity Installed Under Support Schemes Used in Europe
Country Investment
Schemes
Operational
Schemes Operational Scheme Notes
Installed
MW
thru 2012
Construction
MW
12/31/2012
Permitted
MW
thru 2012
U.K. Tax breaks Green certificates 2 ROCs/MWh for OSW through 2015,
then 1.9 ROCs through 2016, then 1.8
2,948 2,359 1,840
Denmark Tax breaks FiT by tender OSW: Tender, fixed price for 50,000
full load hours, then market price
921 400 0
Germany - FiT OSW: 150 €/MWh for 12+ years or
190 €/MWh for up to 8 years, then 35
€/MWh. 7%/yr digression starting ‘18
280 580 6,992
Belgium Cash grant Green certificates
with a floor (de
facto Feed-in
premium)
OSW: the TSO has an obligation to buy
at 107 €/MWh for the first 216 MW,
then at 90 €/MWh (incremental to
market prices)
379 296 736
Netherlands Tax breaks FiT, tender OSW: premium capped at 144 €/MWh;
duration 15 years
247 0 3,238
Sweden - Green certificates GC + Premium in place until 2030; 28
€/MWh (on top of wholesale electricity
price) for 15 years
164 0 920
Finland - FiT 12-year tariff with additional tariff for
projects built in the first 3 years
26 0 736
Ireland - FiT OSW: 140 €/MWh (15 years) capped at
1.5 GW 25 0 1,656
Offshore Wind Market and Economic Analysis Page 64 Document Number DE-EE0005360
Italy Cash grant Tender & floor
price
OSW floor price 176 €/MWh for 25
years
0 0 736
France Accelerated
depreciation Tender OSW: 1.9 GW allocated in tenders in
2012 with 170-200 €/MWh tariffs
0 0 18434
Source: Navigant analysis
34 A volume of 2,448 MW has been allocated under the tender in April 2012.
Offshore Wind Market and Economic Analysis Page 65 Document Number DE-EE0005360
The remainder of this section describes recent changes in operating support schemes for offshore wind
in key countries in Europe.
Belgium
Belgium will need to decide on the next zones to reach its target in 2020, after having allocated the 7
zones initially designated for offshore developments. Three of these zones are operational or under
construction; the others will have to wait until additional grid capacity is built onshore. Additionally,
discussions about the support scheme for these projects have been taking place to cap the level of
support awarded to projects, with no conclusion to date.
Germany
The German FiT payment rate for offshore wind energy has recently become a topic of political
discussion, imposing pressure on the offshore wind sector to reduce its costs. Two federal ministers
(Peter Altmaier, the Federal Minister for the Environment, and Philipp Rösler, the former Federal
Minister of Economics and Technology) conceived a draft law that would reduce the tariff level,
including for projects currently under construction, which created industry-wide worries about
retroactive decisions and a loss of support for the industry. However, the proposal has no chance of
passing (the government not having a majority in the upper house of parliament) and is widely seen as
electioneering in the context of parliamentary elections later in 2013. It nevertheless had a chilling effect
for the industry.
France
France awarded four projects (close to 2 GW) in April 2012 under a competitive tender. The bidders with
the lowest prices won, accounting for industrial experience and local development (and jobs) plans. The
winning projects will receive a fixed tariff for 15 years. Another tender for two additional projects has
been launched and will be awarded in late 2013. Projects are expected to be built over the next several
years, starting in 2017.
Greece
The renewable energy law passed by the Greek parliament in June 2012 resulted in switching from a
fixed FiT to an auction mechanism. In that same month, the Greek Regulatory Authority for Energy
issued the country’s first offshore production license, granted under the former non-competitive
tendering rules. In the meantime, Greece implemented a new tax on renewable energy. The levy is 10
percent on the turnover and applies retroactively. Given this change in law and the current Eurozone
crisis, no wind development is expected in Greece in the short term.
Ireland
Ireland will not prevent the development of offshore wind farms, but it will not provide a tariff for
offshore wind, either (currently, Ireland is entitled to only €68/MWh). Projects may be built for export to
Offshore Wind Market and Economic Analysis Page 66 Document Number DE-EE0005360
the United Kingdom (without any cost for Irish consumers), and a large transmission project between
the two countries is currently under development.
Italy
A decree dated July 6, 2012, introduced a competitive bidding mechanism for offshore wind in Italy until
2015, managed by Gestore dei Servizi Energetici (GSE), the state energy agency. Offshore wind projects
that have a license will win 25-year energy purchase contracts if they can offer the lowest FiT. The first
auction opened in late 2012 but had no conclusive results.
The Netherlands
All of the Subsidie Duurzame Energy (SDE) incentive program subsidies (a form of CfD) have been
allocated. It is not clear yet what the next steps will be. The government increased the target from 14.5
percent renewable energy in 2020 to 16 percent in 2020, but it has yet to decide on the policy to realize
this new target.
Romania
Romania uses tradable green certificates with a floor price and ceiling price. In order to in order to limit
spending on renewable energy, the government has issued an emergency ordinance (retroactively)
cutting the ceiling price and subsidies on renewables.
Spain
The Spanish government announced a €1.35-billion cut to renewable subsidies in Spain. Among the
many changes, Spain has made various reductions to its FiT, with, in some cases, retroactive effects on
existing projects. This has soured investors about the country and has led to a collapse in investment in
renewable energy in the country.
United Kingdom
The United Kingdom’s Energy Bill, published in December
2012, included a number of measures necessary to reform
the U.K. electricity market. These measures aim to
guarantee the security of supply and also ensure that
carbon targets are met. The bill contains a plan to change
the support scheme in 2017, replacing the Renewable
Obligation (RO) with CfD, a type of FiT. From 2015 to 2017,
the Renewable Obligation Certificates (ROCs) allocated per
project will be decreased from 2.0 ROC/MWh to
1.8 ROC/MWh. CfD is a type of FIT where generators will sell their electricity on the market and receive
a top-up payment from the government for the difference between the strike price, which is set by the
government, and that market price. When the market price increases above the strike price, the
The heart of the U.K.’s Energy
Bill is the plan to change the
support scheme in 2017 from
the Renewable Obligation to a
type of FiT known as Contracts
for Difference.
Offshore Wind Market and Economic Analysis Page 67 Document Number DE-EE0005360
difference must be paid to the government. The government will establish a new entity, which will pay
the eligible generators and will also have the power to raise levies from suppliers.
In June 2013, the U.K. DECC announced the strike prices for land-based and offshore wind generation
through 2019.35 The prices are largely in line with the current RO, with land-based wind priced at
£100/MWh and offshore wind at £155/MWh (183 €/MWh) through 2016. This announcement should
resolve the uncertainty that has been delaying the development of Round 3 projects.
2.4 Examples of Policies for Addressing Infrastructure Challenges
2.4.1 General Discussion of Policy Examples
As mentioned in Section 2.2 and further described in Appendix A, the primary infrastructure challenges
faced by the U.S. offshore wind industry include a lack of purpose-built ports and vessels, a lack of
domestic manufacturing and experienced labor, and insufficient offshore transmission. The primary
infrastructure policies for offshore wind that have been implemented or proposed are therefore related
to transmission and port upgrades and providing incentives for local manufacturing.
2.4.1.1 Transmission
Current transmission-related policies for offshore wind focus on the following:
» Direct-connect design (land-based or offshore collector/converter) and system upgrades
» Responsible parties who will plan, build, operate, and maintain the offshore transmission
system
» Cost allocation and cost recovery for offshore transmission investments
» Siting/permitting of transmission
Ratepayers eventually pay for all transmission and generation costs, whether their electric bills are
bundled or each cost is itemized and added to the local distribution cost. Under the current policy in
some parts of the U.S., including the Atlantic coast, any new generator must pay for the cost of the new
interconnection to the grid and any transmission system upgrades required to accommodate the new
generation reliably. These interconnection and grid upgrade costs must then be incorporated into the
cost of the energy produced by that generator to become part of the wholesale cost of that energy that is
ultimately passed through to the ratepayers. However, offshore wind transmission is prohibitively
expensive for single projects to bear. Significant interconnection and grid upgrade costs deter
construction of new offshore wind generation because developers must have an assurance of cost
recovery in order to obtain financing to build new transmission lines. This creates a “chicken and egg”
dilemma for the offshore wind industry. The following policies have been used or considered by various
jurisdictions to help address this dilemma.
35 http://www.argusmedia.com/pages/NewsBody.aspx?id=853372&menu=yes
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A substantial onshore wind resource exists in West Texas and the Panhandle, which are hundreds of
miles from the major demand centers in Central and Eastern Texas. Wind developers could not afford
the cost of single interconnection lines to Central Texas and thus did not pursue development in West
Texas.36 In response, the Texas legislature established Competitive Renewable Energy Zones in West
Texas and the Panhandle and decided that the cost of constructing multiple transmission lines from
West Texas to Central Texas would be shared by all Texas ratepayers.37 In 2008, in response to legislative
action, the Texas Public Utilities Commission established five CREZ lines to be connected to load centers.
Each of the five CREZ lines is to be funded by all Texas ratepayers. The PUC called for $4.93 billion of
CREZ transmission projects to be constructed by seven transmission and distribution utilities and
independent transmission development companies. Transmission lines to each of the five CREZ areas,
totaling 3,600 miles, are now projected to cost $6.8 billion. The initiative will eventually facilitate the
transmission of more than 18 GW of wind power from west Texas and the Panhandle to the state’s
highly populated areas.38
Atlantic Wind Connection (AWC) recognized that the cost of interconnecting multiple offshore wind
farms to onshore substations could be reduced by constructing a major trunk cable offshore to
interconnect with offshore wind farms but have fewer onshore interconnections. AWC has been seeking
approval of the regional transmission operator, PJM, to pass the costs of this cable to all the ratepayers in
PJM who will benefit from the wind power and associated price suppression during peak demand
periods. AWC has recently phased its project and is exploring with the New Jersey Board of Public
Utilities passing the costs of the New Jersey Energy Link portion of the AWC cable onto New Jersey
ratepayers.
Three New York utilities have teamed to proposed development of an offshore wind farm south of Long
Island. New York Power Authority (NYPA), Long Island Power Authority (LIPA), and Consolidated
Edison (NYPA Collaborative) filed an unsolicited request for a lease in federal waters off Long Island for
a 350-MW offshore wind project, possibly expandable to 700 MW. The NYPA Collaborative proposes to
fund interconnections to the wind farm from both Long Island and New York City instead of require
developers to include the cost of the interconnections with the cost of the wind energy.
In order to address the issue of planning transmission for offshore wind projects on a piecemeal basis,
federal and regional regulators have used comprehensive transmission system planning to optimize grid
investments necessary to interconnect offshore wind farms.
» Policy description
o Transmission system planners identify offshore transmission upgrades or new
transmission required to develop an offshore wind project area (i.e., conceptual
transmission expansion plans).
36 CITE 37 CITE 38 http://www.texascrezprojects.com/
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o Developers and transmission system planners evaluate direct single interconnections to
each wind farm or joint interconnections to multiple wind farms (such as the proposed
AWC submarine cable off the mid-Atlantic coast).
» Policy rationale
o Optimizing the transmission infrastructure for consolidated wind farms reduces costs to
the customer and environmental impacts.
o FERC Order 100039 directs regional transmission organizations (RTOs) and independent
system operators (ISOs) to consider state and federal energy policies, which includes
RPSs, when planning expansion of their respective transmission systems. More
specifically, Order 1000 requires that each public utility transmission provider must
participate in a regional transmission planning process that satisfies the transmission
planning principles of Order No. 890 and produces a regional transmission plan.
o A single environmental review and permitting process can be conducted, which reduces
costs and timelines.
In order to address the issue of prohibitively high transmission costs for a single project, jurisdictions
have chosen to allocate the costs of offshore transmission system upgrades to all regional transmission
system customers. RTOs or ISOs have implemented this recommendation by planning and allocating
costs to ratepayers for grid upgrades to accept wind power from
offshore projects (as encouraged by FERC Order 1000). AWC has
asked PJM Interconnections to spread the cost of the New Jersey
Energy Link among all the PJM ratepayers who will benefit from
its operation. Texas provides a state model with its legislation to
spread the costs of such new grid upgrades to all ratepayers for
access to wind energy. 2,600 miles of transmission have been
constructed to date out of a total of 3,600 miles, at a projected total
cost of $6.8 billion.40
In order to address both of the issues mentioned above, states and provinces in the Great Lakes area are
planning to establish a basis for inter-RTO and international cost allocation and transmission siting and
planning.
» This strategy has enabled developers to send power to multiple load centers can improve project
economics and enable larger offshore wind farms, thereby minimizing the transmission
footprint per MW ratio.
» Participating in the development of DOE’s congestion study and National Interest Electric
Transmission Corridor report encourages the designation of certain regions attractive for
offshore development as National Interest Electric Transmission Corridors. This provides federal
assistance for interstate siting that augments transmission planners working through existing
39 See FERC website for summary and further information: http://www.ferc.gov/industries/electric/indus-act/trans-
plan.asp 40 CREZ Progress Report No.12, at page 6, July 2013.
FERC Order 1000
encourages RTOs and
ISOs to allocate costs of
offshore grid upgrades to
all ratepayers.
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institutions like RTOs but does not override state siting authorities that deny construction
authority.
In order to address the issue of a disjointed and unclear permitting process, many jurisdictions are
planning to establish clear permitting criteria/guidelines for transmission project siting and installation.
Model guidelines for consideration by individual states are being developed by regional organizations
such as RTO Stakeholder Committees and the New England Conference of Public Utility
Commissioners.
In order to address the transmission cost issue, some coastal states are planning to promote utilization of
existing transmission capacity reservations to integrate offshore wind. Some conventional generation
facilities that are aging and often operate consistently below full capacity may be utilizing less than their
full transmission capacity reservations. Many of these facilities are located in close proximity to the
shoreline and could serve as injection points for new offshore wind facilities if a substantial portion of
corresponding transmission is not being used. Utilization of consistently unused transmission capacity
by new offshore wind facilities may preclude the need for substantial onshore transmission upgrades.41
Ultimately, this pattern of development could allow offshore wind to be scaled up to utilize the full
transmission capacity for conventional generating units, replacing those units as they are run at lower
capacities and ultimately retired.
In order to address the issue of a piecemeal transmission planning process, some states have proposed to
establish policies supporting the development and implementation of Integrated Resource Planning.
State public utility commissions have engaged interested parties in identifying additional transmission
resources needed to meet state renewable energy obligations. Utilities could be required to objectively
analyze the potential of all available resources. The Eastern Interconnection States’ Planning Council has
the potential to be a forum for state discussions on this topic.
2.4.1.2 Ports
Maritime ports were not originally designed with the offshore wind sector in mind. In many cases,
quaysides, laydown areas, and clearances must be upgraded to accommodate ever-larger turbines and
foundations, as well as an increasing volume of offshore projects. Large ports in Europe are undergoing
major upgrades to support the development of offshore wind. Massachusetts announced investment of
$100 million to upgrade the New Bedford Port for construction of the Cape Wind Farm.
The primary offshore wind policies related to port infrastructure focus on the following:
» Overall port strategy and planning at the country level
» Upgrades to ports (when ports are held by the state)
41 This unused transmission capacity would remain “tagged” to the conventional generation unit for purposes of
most transmission capacity markets, but would still be available most of the time for energy transmission from wind
generation, including during most peak demand periods when the wind energy would be dispatched before these
more costly peaking generation units.
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» Incentives encouraging port upgrades (when ports are privately held)
The Navigant Consortium identified two policy examples, used in countries such as Germany, the
United Kingdom, and Denmark and discussed in detail in Appendix C, related to improving the port
infrastructure to better accommodate offshore wind:
Ports Policy Example 1: In order to address the challenge of funding upgrades to ports to accommodate
offshore wind, several European countries have chosen to upgrade state-held ports or provide incentives
for private port upgrades.
» If a country’s ports are held by the state, the national government identifies and performs
upgrades needed by strategically positioned ports.
» If a country’s ports are held by the private sector, the government provides incentives to
encourage the port upgrades. The government may have a vested interest in supporting the
private sector (e.g., meeting national renewable energy targets).
Ports Policy Example 2: In order to address the issue of a disjointed ports planning process, European
countries often develop a country-wide strategy focusing on a select number of locations spread around
the coast. A government agency commissions a study to assess the following:
» Specific requirements of the offshore wind industry for ports
» Current capabilities of the country’s ports
» Potential port expansion or development to meet the needs of the offshore wind sector
Based on the study’s findings, the government agency develops a policy for long-term port
development.
2.4.1.3 Manufacturing
Manufacturing-related policies for offshore wind include the following categories based on our research:
» Government support for offshore wind manufacturing at port sites
» Favorable customs duties, export credit assistance, or quality certification
Manufacturing Policy Example 1: In order to address the challenge of promoting a domestic supply chain,
countries such as Germany have provided government support for offshore wind manufacturing at port
sites, including the following policy mechanisms:
» Expedited permitting for prototype turbines (e.g., Bremerhaven – Multibrid)
» Creation of wind-related training/degree programs at local universities
» Tax credits
» Loans
Manufacturing Policy Example 2: In order to further address the supply chain issue, European countries
have provided favorable customs duties, export credit assistance, and quality certification. A country’s
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export credit agency provides loans or loan guarantees for the sale of domestically manufactured turbine
or turbine components to customers in other countries. By assuming part of the risk, the export credit
agency increases the likelihood that companies obtain financing from private banks and investors.
Frequently, obtaining financing for a project is key to winning orders.
2.4.2 Current U.S. and State Policies
In the United States, offshore wind energy resource zones for targeted grid investments have not been
specified, although such zones have been specified for the land-based wind market. California,
Michigan, and Texas have designated specific areas for land-based wind development to provide a level
of certainty for transmission development to avoid an “if we build it, they will come” situation. Table
2-5 presents an overview of these transmission policies, while Appendix B provides further detail.
Table 2-5. State-based Wind-focused Transmission Policies
State Land-based Transmission Policy Economics
California » Renewable Energy Transmission Initiative
(RETI)
» Started in 2007
» Identifies and ranks resource zones and
develops conceptual transmission plans for
highest ranked zones
Developers pay an initial deposit for
ratepayer-subsidized transmission
development and then later pay the
balance of the total transmission
interconnection cost through long-
term operating revenues.
Michigan » State legislation in 2008 required the Public
Service Commission (PSC) to identify wind
energy resource zones
» In 2010, the PSC identified two zones
» Zones are intended to expedite development
of transmission
Affected parties within the zones are
given 21 days to reach agreement on
a voluntary cost allocation
methodology for the transmission
upgrade projects.
Texas » State legislation in 2005 instructed the Texas
Public Utilities Commission (PUC) to
establish competitive renewable energy
zones (CREZ) » In 2008, the PUC designated five CREZs
» The initiative aims to facilitate the
transmission of more than 18 GW of wind
power from west Texas and the Panhandle
to the state’s highly populated areas
Transmission lines to each of the
five sites, totaling 3,600 miles, is to
be funded by all ratepayers at a
projected cost of $6.8 billion.42
Source: Navigant analysis
42 CREZ Progress Report No.12, at p. 6, July 2013.
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2.4.3 Current Policies in Europe
Table 2-6 is a summary of infrastructure policies currently in place in selected countries in Europe.
Detailed descriptions of these policies are provided in Appendix C.
Table 2-6. Policies for Addressing Infrastructure Challenges in Europe
Country Transmission Policy Ports Policy
Denmark » TSO is responsible for funding
and connecting wind farms to
the grid » Costs recovered from all
customers
» No plans for inter-project
transmission
Ports funded by municipalities
Germany » TSOs are responsible for
building and operating OSW
transmission connections
» Costs recovered from all
customers
» New German Energy Act
clarifies liability for
construction delays
» State of Bremen supports
Bremerhaven with R&D and
investment support schemes » New Bremerhaven terminal
will be funded through a
concession model
» Lower Saxony government is
directly investing in 3 North
Sea ports
Netherlands » TSO is responsible for
construction and management
of the grid
» Offshore developers are
responsible for transmission
system costs
» Developing HVDC
interconnection with Denmark
Ports are all independent
companies and do not receive any
funding or direct support from the
government
United Kingdom » Competitive tender to become
an OFTO and collect 20 years of
payments » Operators can choose to
construct their own
transmission connections or opt
for the OFTO to do so
» The Crowne Estate is soliciting
applications from
manufacturers and ports » £60 million is available
between 2011 and 2015
Source: Navigant analysis
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2.5 Policies That Address Regulatory Challenges
2.5.1 General Discussion of Policy Examples
As mentioned in Section 2.2 and further described in Appendix A, the primary regulatory challenges
faced by the U.S. offshore wind industry include uncertain site selection and leasing processes,
fragmented permitting processes, and public resistance due to uncertain environmental impacts. The
following policy examples that affect the leasing, permitting, or operations of offshore wind projects
have been implemented or proposed:
2.5.1.1 General
The following policies have been used to address the issue of a disjointed planning process:
» Global planning approach that includes offshore. In 2010, the U.S. Department of the Interior
(DOI) established its ”Smart from the Start” Initiative for Atlantic Ocean wind to identify
priority WEAs for potential development; improve BOEM coordination with local, state, and
federal partners; and accelerate the leasing process. BOEM has established task forces with at
least 13 states to engage intergovernmental partners and help inform BOEM’s planning and
leasing processes.
» Federal/state policy coordination. In June 2010, a memorandum of understanding (MOU) signed
by the DOI and the states of Maine, New Hampshire, Massachusetts, Rhode Island, New
York, New Jersey, Delaware, Maryland, Virginia, and North Carolina created the Atlantic
Offshore Wind Energy Consortium to facilitate federal/state offshore wind development
coordination. In February 2012, five Great Lakes states and ten federal agencies signed an
MOU to establish a more coordinated approach to ensure efficient, expeditious, orderly, and
responsible evaluation of offshore wind power projects in the Great Lakes.
2.5.1.2 Leasing
The following policies have been used to address the issue of uncertain site selection and leasing
processes:
» Regulatory framework for marine spatial planning. Marine spatial planning could promote
national objectives, such as enhanced national energy security and trade, and provide specific
economic incentives (e.g., cost savings and more predictable and faster project
implementation) for commercial users.
» Dedicated offshore wind areas. State regulators who identify environmental constraints and
engage in discussions with stakeholders with competing offshore uses lead the identification
of WEAs. This policy is the first phase of BOEM’s Smart from the Start initiative.
» Phased access, where developers have a short-term right to evaluate a wind resource with a
longer-term right to develop.
» Regulator selection of sites, followed by developer competitive bidding. This process is used in Texas,
New York, and Denmark.
Offshore Wind Market and Economic Analysis Page 75 Document Number DE-EE0005360
» BOEM call for lease nominations. BOEM held its first two competitive lease sales for offshore
wind in Rhode Island and Virginia in 2013.
2.5.1.3 Permitting
The initial challenge for offshore wind development was lack of a specified leasing process. Cape Wind
filed its initial permit application with the US Army Corps for its wind farm and transmission
interconnection in 2000 and then the Energy Policy Act of 2005 transferred jurisdiction and lead NEPA
federal agency status to the U.S. Minerals and Management Service, now the Bureau of Ocean Energy
Management. When BOEM issued its initial proposed draft leasing regulations, the process included
three Environmental Impact Statements, which could have taken up to 5 to 7 years to attain.
The main policy examples to address these permitting challenges differ primarily in the level of
centralization in producing Environmental Impact Statements (EISs). The following policies have been
used to address the issue of fragmented or unclear permitting processes:
» Require site-specific EISs for every offshore wind project: Under this policy, developers produce
individual EISs for each wind farm, regardless of whether adjacent projects have addressed
similar issues.
» Conduct a programmatic EIS (PEIS) over broad geographic areas to determine categorical exclusions,
followed by less-detailed environmental assessments for individual projects: The objective of this
policy is to gain economies of scale and scope in conducting EISs, addressing common issues
across multiple projects in a common area and saving time and expense. Issues that are
unique to a certain project are addressed in a less detailed, site-specific EIS.
» Develop a programmatic EIS (PEIS) for a broad geographic area followed by detailed EISs for selected
individual projects: This example is similar to the previous example, with the exception that the
project-specific EISs are more detailed. A PEIS evaluates the impacts and identifies
appropriate mitigation for a range of standard technologies to be installed in a relatively
uniform environment. The completed PEIS provides guidance to developers and regulators
for subsequent specific development proposals. In the United States, if the same technologies
are proposed with the mitigation recommended by the PEIS, the subsequent National
Environmental Policy Act (NEPA) review can focus only on unique aspects of the specific
technologies or environment at the proposed wind farm site and cable route, which may
significantly reduce the NEPA review period. A PEIS will generally take a couple of years to
complete, but if initiated early, for example, during the initial WEA identification and
competitive auction processes, it can significantly expedite final review of the winning
leaseholder’s project. This is especially true if programmatic EISs or Environmental
Assessments (EAs) are conducted for WEAs simultaneously with the lengthy process to
determine the winning bidders in areas where competitive interest exists.
2.5.1.4 Operations
There are multiple examples for the environmental and safety compliance monitoring of offshore wind
plants, which address the issues of public resistance and uncertain environmental impacts. These
examples differ primarily in the party responsible for conducting monitoring activities.
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» Environmental and safety compliance monitoring by the government: A government agency is
responsible for conducting monitoring activities prior to, during, and after construction of an
offshore wind farm to assess a baseline characterization of the local environment and any
subsequent changes.
» Self-monitoring by developers or operators: The developer or operator of a wind farm monitors
the impact of its offshore wind farm on the environment and submits the monitoring data to a
government agency for verification.
» Monitoring by third parties: A certified, independent third party monitors the impact of an
offshore wind farm on the environment and submits the monitoring data to a government
agency for verification.
2.5.2 Current U.S. and State Policies
2.5.2.1 Leasing
BOEM has taken an active role in conducting auctions for leases in federal waters.
On July 31, 2013, BOEM held the first-ever competitive
lease sale for renewable energy in federal waters south of
Rhode Island and Massachusetts. BOEM auctioned the
area as two leases: the 97,500-acre North Lease and the
67,250-acre South Lease, located about 9.2 nautical miles
south of Rhode Island. According to a recent NREL
report, the North Lease has the potential for installed
capacity of 1,955 MW and the South Lease for 1,440 MW.
Rhode Island-based Deepwater Wind was the winning
bidder, with a bid of $3.8 million for the two sites. Deepwater Wind plans to construct five 6-MW
turbines within 3 miles of Block Island, Rhode Island, in 2014 and monitor their performance while
seeking offtake agreements for the larger wind farm, including into New York.
On September 4, 2013, BOEM held the second competitive lease sale for a commercial lease area offshore
Virginia. Dominion Virginia Power was the winning bidder, with a winning bid of $1.6 million for the
single 112,800-acre site. The acreage is located 23.5 nautical miles from Virginia Beach, with a potential
for over 2,000 MW. Dominion first plans to construct two 6-MW Alstom turbines on the edge of the
WEA and monitor their performance before constructing the large wind farm in subsequent phases.
The winning bidder must submit a site assessment and a construction and operations plan by 2014,
complete surveys within three years after that, and then submit the work for federal review, which could
take another three years.
BOEM held the first two
competitive lease sales for
renewable energy in federal
waters offshore Rhode Island
and Virginia in 2013.
Offshore Wind Market and Economic Analysis Page 77 Document Number DE-EE0005360
U.S. states are taking a variety of approaches to offshore wind site selection and leasing. Common
themes are to form panels or task forces to engage local stakeholders and to coordinate state efforts with
BOEM and various regional consortia. Figure 2-2 provides a high-level summary of state-level policies
that are being employed, and further details are provided in Appendix B.
Figure 2-2. Site Selection and Leasing Policies in U.S. States
Policy Options
Barrier: Regulatory
Jurisdictions where Used
Delaw
are
Illino
is
Main
e
Mary
land
Massach
usetts
Mich
igan
Oh
io
New
Jersey
New
Yo
rk
No
rth C
arolin
a
Rh
od
e Island
Texas
Virg
inia
General: Panels or task forces in place to engage local stakeholders to identify constraints and sites for offshore wind
1 2
Federal/state policy coordination (3)(4)
Leasing: Regulatory framework for marine spatial planning 5
State selects sites &conducts competition 5
BOEM call for lease nominations
(1) Report of the Michigan Great Lakes Wind Council, October 2010, identifies 13,339 square miles which are considered to be most favorable to the sustainable development of offshore wind energy. Five priority areas were identified, known as wind resource areas (WRAs). GLOW Council expired under new Governor who is re-evaluating offshore wind development as in Ohio & Wisconsin.
(2) Ohio’s Offshore Wind Turbine Placement Favorability Interactive Map Viewer tool can be used to evaluate sites.(3) In June 2010, the Atlantic Offshore Wind Energy Consortium was created to facilitate Federal-state offshore wind development
coordination by an MOU signed by the U.S. Department of the Interior and the states of ME, NH, MA, RI, NY, NJ, DE, MD, VA, and NC. (4) In February 2012, an MOU was signed among 5 Great Lakes states and 10 federal agencies that creates an Offshore Wind Energy
Consortium to promote the efficient, expeditious orderly and responsible evaluation of offshore wind power projects in the Great Lakes. (5) The TX General Land Office stipulates which areas are available for lease, the minimum MW size, and the minimum royalty rates.
Winning bidders are granted phased access, first given research rights and then construction and operation rights.
Source: Navigant analysis
2.5.2.2 Permitting
On February 3, 2012, BOEM issued a Notice of Availability for the final EA and Finding of No Significant
Impact (FONSI) for commercial wind lease issuance and site assessment activities on the Atlantic OCS
offshore New Jersey, Delaware, Maryland, and Virginia.43 Instead of waiting for the site assessment plan
(SAP) to be filed to trigger the SAP NEPA review, BOEM initiated a programmatic environmental
assessment (PEA) for these four states simultaneously. By covering all major site assessment and
characterization technologies and their impacts, this PEA is expected to enable more expeditious review
43 http://www.boem.gov/Renewable-Energy-Program/State-Activities/VA/Commercial-Lease-for-Wind-Energy-
Offshore-Virginia.aspx
Offshore Wind Market and Economic Analysis Page 78 Document Number DE-EE0005360
of site assessment proposals by developers in these four states. The PEA was conducted during the
nomination of lease sites in Maryland and Virginia and did not delay those calls for information and
leases. Winning bidders in Maryland and Virginia may seek expedited EAs and departures from certain
SAP requirements if they use one of the standard wind measurement technologies that the PEA has
already determined do not to cause significant impacts with appropriate mitigation. Even if one or two
issues must be addressed that were not covered in the PEA, then only those issues need be addressed,
and the EA can be reviewed and issued more promptly than an EA covering all the site assessment
issues.
Similarly, BOEM could eventually determine routine measurement activities as “categorical excluded,”
meaning they do not individually or cumulatively have a significant effect on the human environment
and would require no EA or EIS. The Council of Environmental Quality (CEQ) issued new guidance in
2011 on establishing and maintaining categorical exclusions for routine activities. Many oil and gas
exploration activities have been granted categorical exclusions. Over time, BOEM has acknowledged that
turbine construction may warrant an EA and that site assessment activities, such as installing a
meteorological tower, could become routine and may warrant categorical exclusions instead of EAs.44 As
BOEM and other federal agencies review more measurement technologies, they will be able to issue their
NEPA reviews more expeditiously and accelerate the permitting process.
States have a regulatory role when a wind energy project is proposed for construction in federal or state
waters. Under the Submerged Lands Act, states have authority generally over the first three nautical
miles of a state’s coastal submerged lands, and states have passed coastal management laws and
developed permitting and leasing programs for activities in state submerged lands. Offshore wind
energy projects proposed in state waters could be subject to a comprehensive regulation that is managed
by a single state agency or to permitting authorities managed by multiple state and local agencies. For
example, Massachusetts, Rhode Island, Ohio, and New York have state siting boards that coordinate
other state agencies and provide one-stop permitting for in-state generation and the interconnection
cables offshore and onshore.
States will have a regulatory role for projects in federal waters if a portion of the federal project (e.g., a
cable) is constructed in state submerged lands. Furthermore, the Coastal Zone Management Act
(CZMA) gives states the authority to require that projects in federal waters are consistent with that
state’s coastal zone policies and federally-approved coastal zone management program. This state
review process is frequently referred to as a CZMA “consistency review.”
44 BOEM stated when issuing its Final Rule on offshore leasing: “After the impacts and related mitigation of
renewable energy activities on the OCS are better understood, it is possible that projects may require an EA. As the
program matures, MMS will review the impacts from the program and make a determination whether we can
recommend categorical exclusions for certain activities to the Council on Environmental Quality.” 74 Federal
Register 19,689.
Offshore Wind Market and Economic Analysis Page 79 Document Number DE-EE0005360
2.5.2.3 Operations
Federal and state authorities with jurisdiction currently approve energy facilities subject to conditions on
construction and operation, which protect the public and environment from new facilities. For offshore
wind farms, such conditions may include the following:
» Restrictions on public access to the facility for public safety
» Restrictions on operation during extremely high winds that could cause catastrophic failure and
loss of the blades
» Post-construction environmental monitoring surveys of birds, bats, and marine mammals
» Seabed scouring around the foundations to ensure ongoing protection of the environment and
mitigation of any significant effects that may arise
The U.S. Fish and Wildlife Service (USFWS) negotiates the survey protocols for avian and bat studies,
which include post-construction monitoring through their jurisdiction under the Endangered Species
Act and the Migratory Bird Treaty Act. BOEM has issued new guidelines for avian and bat surveys and
coordinates the review of such surveys in its role as Lead Federal Agency under NEPA. The USFWS has
issued new guidelines for avian and bat surveys for terrestrial wind farms and is beginning to consider
guidelines for surveys for offshore wind farms. Earlier studies identified flashing red lights as providing
a deterrent effect, unlike flashing white lights, which attract some species. Government-sponsored
studies may help identify additional technologies that may deter birds from flying through offshore
wind farms.
BOEM also has issued new guidelines for marine mammals and sea turtles and coordinates the review of
such surveys in its role as Lead Federal Agency under NEPA. 45
Cape Wind has agreed to conduct three years of post-construction avian and bat aerial and boat-based
surveys as a condition of their BOEM lease. The cost of these post-construction surveys will exceed $1
million per year.
While more limited post-construction monitoring of mammals is also required for the Cape Wind
project, the biggest concern about marine mammals is contact, or “allision,” with vessels. The
construction period requires the use of many large vessels and therefore requires mitigation measures to
protect endangered or threatened marine mammals, such as the following:
» Reduced vessel operating speeds
» Trained, independent protected species observers
» Hydro-acoustic monitoring
» Construction delays and shutdowns when certain mammals are within exclusion zones
45 Guidelines for Providing Information on Marine Mammals and Sea Turtles for Renewable Energy Development
on the Atlantic Outer Continental Shelf Pursuant to 30 CFR Part 585 Subpart F
Offshore Wind Market and Economic Analysis Page 80 Document Number DE-EE0005360
Small vessels make O&M visits to offshore turbines, but these visits occur only a couple of times per year
and are thus much less threatening to marine mammals.
Further government studies of the mating and calving grounds and migratory routes of endangered
whales may help to site wind farms safe distances from the whales and provide more protection during
construction and operation of wind farms.
2.5.3 Current Policies in Europe
Table 2-7 summarizes the regulatory policies currently in place in selected countries in Europe. The first
row of Table 2-7 describes the challenges in each policy area that exist in the U.S. Detailed descriptions of
these policies are provided in Appendix C.
Table 2-7. Policies that Address Regulatory Challenges in Europe
Country Planning and Concessions Permitting Operations
Challenge for the
U.S.
Uncertain site selection
process and timeline Fragmented permitting
process
Environmental and
public resistance
Denmark » Centralized spatial
planning procedure
» Developers can either
respond to tenders from
the DEA or apply to
develop a site
» Six offshore wind areas
have been identified
» DEA is a one stop
shop
» EIA is required if
environmental
impact is likely
Developers must
have
comprehensive
environmental
monitoring
programs
Germany » Five priority areas for
offshore wind identified
in the Germany North
and Baltic Seas
» Open door
procedure for
permits
Developers are
responsible for
baseline assessment
and annual
monitoring
Netherlands » OSW zones have been
identified
» Preparing for Dutch
Round 3 » Competitive tendering
for development rights
» MTPW is a one stop
shop with an
integrated
assessment
framework
Developers must
monitor the
project’s impact on
the environment
United Kingdom » Extensive marine spatial
planning
» Nine zones identified for
Round 3 » 80 year leases for Round
3
» One stop shop
approach » New Infrastructure
Planning process for
OSW permitting
Developers are
responsible for
monitoring
environmental
impacts
Source: Navigant analysis
Offshore Wind Market and Economic Analysis Page 81 Document Number DE-EE0005360
2.6 Summary
Table 2-8 is a summary of policy examples that have been used or proposed to address the various
barriers to the U.S. offshore wind industry. The left column of the table lists the policies in each area that
have been successfully used by European or U.S. federal or state jurisdictions as described in Sections 2.3
to 2.5. The right column of the table provides a summary of U.S. and state offshore wind policy
developments in 2013.
Table 2-8. Offshore Wind Policy Examples and Developments
Barrier Policy Examples 2013 U.S. Developments
Co
st C
om
pet
itiv
enes
s
» Long-term contracts for power
» ORECs
» ITC for developers
» PTC for developers
» Low-interest loans and guarantees
» Accelerated depreciation
» State FiTs
» The U.S. PTC and ITC were extended for
projects that begin construction46 by year-end
2013 but another short-term extension is
unlikely unless part of major tax reform. The
50% first-year bonus depreciation allowance
was also extended in 2013.
» The U.S. DOE announced seven projects that
will receive $4M in funding to complete
engineering and planning as the first phase of
the Offshore Wind Advanced Technology
Demonstration Program.
» The Maryland Offshore Wind Energy Act
established Offshore Wind Renewable Energy
Credits for up to 200 MW, limiting ratepayer
impacts while broadening the cost-benefit
analysis, including consideration of peak
coincident price suppression.
» The Maine legislature passed a bill that re-
opened the bidding process for ratepayer
subsidies to offshore wind projects.
» The NJ BPU continues to promulgate rules for
1100 MW of ORECs.
Infr
astr
uct
ure
» Promote utilization of existing
transmission capacity reservations
to integrate offshore wind
» Target BOEM Wind Energy Areas
and consider public policy
mandates, such as RPS, as required
by FERC
» Massachusetts is investing $100M to upgrade
the New Bedford Port for construction of the
Cape Wind Farm.
» Atlantic Wind Connection was split into New
Jersey Energy Link as the first phase and
continues to ask that all ratepayers share the
costs as well as the benefits.
46 More info on the IRS definitions are available at http://www.irs.gov/pub/irs-drop/n-13-29.pdf and
http://www.irs.gov/pub/irs-drop/n-13-60.pdf
Offshore Wind Market and Economic Analysis Page 82 Document Number DE-EE0005360
Reg
ula
tory
Lea
sin
g
» Similar to BOEM’s ”Smart from the
Start” model - 4 stage authorization
process: (1) planning & analysis; (2)
leasing; (3) site characterization &
assessment; and (4) commercial
development
» BOEM held the first two competitive lease
sales for renewable energy offshore Rhode
Island and Virginia.
» Illinois passed the Lake Michigan Wind
Energy Act which requires the Illinois DNR
to develop a detailed offshore wind energy
siting matrix for Lake Michigan.
Per
mit
tin
g » Expedite lease auction process and
set efficient schedule for NEPA
review of leasing and permitting
process in accordance with CEQ
NEPA regulations
» BOEM continues to issue leasing guidelines,
conduct marine research, lead stakeholder
meetings to revise WEAs, and hold
educational seminars to facilitate leasing and
permitting.
Op
erat
ion
s » Self-monitoring of environmental
and safety compliance by
developers/ operators
» Government and stakeholder working
groups are developing standardized
equipment certifications and construction
and operations safety protocols.
Source: Navigant analysis
A review of European policies that are designed to stimulate demand (i.e., policies that address cost
competitiveness) indicates that a variety of approaches have resulted in significant offshore wind
development. A portfolio approach that incorporates multiple policy elements has also proven to be
effective, as evidenced by the U.S. land-based wind market, which has been stimulated through a mix of
PPAs with PTCs, ITCs, and RPSs.
Infrastructure policies have shown to be effective in reducing costs and ensuring the demand can be
filled. These policies help to put critical infrastructure components in place such as transmission and
ports. Mid- to long-term policies help to instill confidence in the market. Manufacturers built portside
manufacturing capacity in the United Kingdom and Germany after those countries signaled that long-
term demand would exist.
Regulatory policies also help to streamline the siting and permitting processes and provide more
certainty to investors. Clear and stable processes such as one-stop permitting are in place in most
European countries that are active in offshore wind. In the U.S., BOEM and many state governments are
developing and implementing similar policies to eliminate uncertainty, reduce the time required for
development, and ultimately reduce the cost of offshore wind.
Offshore Wind Market and Economic Analysis Page 83 Document Number DE-EE0005360
3. Economic Impacts
3.1 Summary
3.2 Scope of Update
The original intent of this annual report on economic impacts of the U.S. offshore wind industry was to
benchmark our 2012 projections against actual results in 2013 and 2014. However, as shown in Figure
1-3, our 2012 forecasts did not show installations in 2013 and 2014. Because of this, we did not project
any employment or economic impacts in 2013 and 2014, as shown in Figure 3-1 and Figure 3-2,
respectively. However, we know—through press releases, conference presentations, and conversations
with industry stakeholders—that people are currently employed in the U.S. offshore wind industry. As a
result, we decided to use this year’s report to assess current employment and investment as a baseline
for future studies. We first describe our data collection efforts and then the resulting levels of
employment and investment.
Figure 3-1. Annual U.S. Employment Supported by the U.S. Offshore Wind Industry, 2012 Projection
Summary of Key Findings – Chapter 3
» Construction has not yet started on offshore wind farms, so employment levels are low.
» Employment likely ranges from 150 to approximately 600 FTEs, based on a survey of current
stakeholders.
Offshore Wind Market and Economic Analysis Page 84 Document Number DE-EE0005360
Source: Navigant analysis
Figure 3-2. Annual U.S. Economic Activity Supported by the U.S. Offshore Wind Industry, 2012
Projection
Source: Navigant analysis
3.3 Baseline Data Collection
Our data collection efforts consisted of an online survey sent to offshore wind industry stakeholders. We
then followed up via phone calls with key stakeholders (e.g., large developers or construction firms that
likely have significant employment in 2013) that did not respond to the online survey.
Finally, as shown in Table 1-2, several projects have reached an advanced stage, and components are
likely being manufactured for those projects. However, many companies manufacture equipment for
both the onshore and offshore markets and do not track employment between the two. Also, we do not
have information on what components are being sourced domestically or purchased from countries with
significant offshore wind manufacturing. Given these uncertainties, we looked a range of possibilities on
what could be under fabrication now and how much is domestically sourced. We used our JEDI47 model,
which was created in 2012, to assess potential levels of employment.
3.3.1 Online Survey
47 NREL’s JEDI models are publicly available spreadsheet tools that apply state-specific IMPLAN year 2010
multipliers. The JEDI analysis tools were developed by NREL in conjunction with MRG & Associates. For more
information on the JEDI tools, see http://www.nrel.gov/analysis/jedi/.
Offshore Wind Market and Economic Analysis Page 85 Document Number DE-EE0005360
As discussed above, the Navigant Consortium sent out an online survey to offshore wind industry
stakeholders in early 2013. The survey included several questions on employment and investment, as
shown below:
» How many full time U.S. employees do you currently have in each of these areas?
Component or subsystem supplier
Wind turbine OEM
Developer
OEM
EPC
O&M
Other
» What percent of total labor hours in each area are designated exclusively to offshore wind?
» If you have employees dedicated to offshore wind, in what states are they located?
» Has your company made any offshore wind specific investments this year? If so, what was the
amount, and what was the category: (a) manufacturing, (b) construction, or (c) other?
122 people viewed the survey, 40 started it, and 30 completed it. We received the most information for
the developer and other categories. To protect the privacy of individual respondents, we will only report
on totals, not individual industries or states. The total number of FTEs and investment are shown in
Table 3-1.
3.3.2 Phone Survey
As part of the online survey, we collected information on what company each respondent worked for.
For companies that likely employed people right now or were making large investments, we reached out
to them via phone calls. We were able to collect information from several more companies, and the
results are included in Table 3-1.
3.3.3 JEDI Estimates
We examined the projects in Table 1-2 and used the offshore wind JEDI model to simulate the
manufacturing related employment to support the projects that have 2015 and 2016 installation dates.
Items that could be in process include blade assemblies, processing of raw materials, forgings and
castings, turbine components, electrical sub components, and cabling. We then selected a range of
possibilities for domestic sourcing and analyzed those using JEDI. The range of results is shown in Table
3-1. The low end assumes zero domestic sourcing, and the high end assumes 100 percent domestic
sourcing.
3.4 Results
Current employment levels could be between 150 and 590 FTEs, and current investment could be
between $21 million and $159 million. The ranges are driven by our uncertainty about from where
advanced-stage projects are sourcing components. These estimates now provide us a baseline to check
Offshore Wind Market and Economic Analysis Page 86 Document Number DE-EE0005360
employment against for future reports. As the advanced stage projects start construction, employment
levels will likely double or triple to support equipment transport and installation. Our 2014 report will
focus on trying to capture those impacts.
Table 3-1. Estimated Employment and Investment in the U.S. Offshore Wind Industry
Project Phase Data Source Total FTE’s Total Investment
Development Online and Phone Survey 150 $21M
Manufacturing and
Construction
Modeled Estimates 0 to 440 0 to $138M
Total 150 to 590 $21M to $159M
Source: Navigant analysis
Offshore Wind Market and Economic Analysis Page 87 Document Number DE-EE0005360
4. Developments in Relevant Sectors of the Economy
4.1 Introduction
The development of an offshore wind industry in the United States will depend on the evolution of other
sectors in the economy. This section identifies and evaluates the related economic sectors and their
potential impact on an offshore wind industry.
We categorize two types of potential impact: demand for offshore projects and the price of those
projects. Table 4-1 summarizes the related economic sectors and their potential impact on offshore wind.
Summary of Key Findings – Chapter 4
» The development of an offshore wind industry in the U.S. will depend on the evolution of
other sectors in the economy.
» Two factors in the power sector will have the largest impact: the change in the price of natural
gas and the change in coal-based generation capacity.
Offshore Wind Market and Economic Analysis Page 88 Document Number DE-EE0005360
Table 4-1. Factors That Impact Offshore Wind
Economic Sector Factor Potential Impact on
Offshore Wind
Relative
Importance
of Factor Change in
Demand
Change in
Price
Power sector Change in overall demand for
electricity.
X Low
Change in the country’s nuclear
power generation capacity.
X Medium
Change in natural gas prices. X High
Change in the country’s coal-
based generation capacity.
X High
Oil and gas Change in level of offshore oil
and gas development. X Medium
Construction Change in level of construction
activity using similar types of
equipment and/or raw materials
as offshore wind.
X Low
Manufacturing Change in manufacturing of
products that utilize similar
types of raw materials as
offshore wind.
X Low
Telecommunications Change in demand for subsea
cable-laying vessels. X Low
Financial Change in the cost of capital. X Medium
Source: Navigant analysis
4.2 Power Sector
4.2.1 Change in Overall Demand for Electricity
Factors such as population growth, changes in the level of economic activity, adoption of energy
efficiency and demand response measures, and changes in climate could change the overall demand for
electricity in the United States. This, in turn, could impact the demand for offshore wind projects in the
United States. That said, electricity consumption in the United States has increased, on average, less than
1 percent per year over the last decade (see Figure 4-1). Significant increases in electricity consumption
are unlikely in the foreseeable future, due to moderate levels of economic growth and population
growth, as well as increasing levels of energy efficiency.
Offshore Wind Market and Economic Analysis Page 89 Document Number DE-EE0005360
Figure 4-1. U.S. Retail Electricity Sales: 2002-2012 (million kWh)
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: EIA
4.2.2 Change in the Country’s Nuclear Power Generation Capacity
After the Fukushima nuclear accident in Japan in 2011, Germany decided to abandon over 20 GW of
nuclear power, closing eight plants immediately, with the remaining nine plants set to close by 2022.
Realizing the additional power generation capacity needed to avoid a supply shortfall, the country has
developed and begun to execute plans to install a significant number of large offshore wind farms in the
North and Baltic Seas. Through 2012, Germany’s installed capacity of offshore wind was 278 MW.
Navigant expects this to grow to greater than 10 GW by 2020. If another incident like Fukushima were
to occur somewhere in the world, it is at least feasible that the United States could contemplate a similar
retreat from nuclear power. The subsequent push to make up for the shortfall could increase offshore
wind development in the United States.
Similarly, an increased pro-nuclear attitude in the United States, potentially as a way to meet CO2-
reduction targets, could reduce offshore wind activity in the United States if the levelized cost of new
nuclear plants were to be more attractive than that of offshore wind. In early 2012, the United States
Nuclear Regulatory Commission approved the construction license for four new nuclear reactors, two in
South Carolina and two in Georgia. These would be the first nuclear reactors built from scratch in the
last 30 years. If these reactors are successfully completed and become operational, their impact on the
future of offshore wind in the United States is unclear. There is also uncertainty around the expected
LCOE from these new nuclear plants, as the nuclear industry has not had a strong track record of
meeting projected costs and schedules.
Offshore Wind Market and Economic Analysis Page 90 Document Number DE-EE0005360
4.2.3 Change in Natural Gas Prices
Since 2000, most new power generation capacity in the United States has come from natural gas and
wind (see Figure 4-2), partly in response to the environmental impacts of coal-fired electricity
generation.
Figure 4-2. U.S. Power Generation Capacity Additions by Fuel Type
Source: EIA
In addition to having a lower carbon intensity than coal, natural gas prices have remained relatively low,
in large part to the supply of low-cost gas from the Marcellus Shale. Natural gas prices surpassed
$6/MMbtu in January 2010 but since then have largely remained below $5/MMbtu, including a low of
less than $2/MMbtu in April 2012 (see Figure 4-3).
Offshore Wind Market and Economic Analysis Page 91 Document Number DE-EE0005360
Figure 4-3. Henry Hub Gulf Coast Natural Gas Spot Price 2007-2013
Source: EIA
This decline has reduced wholesale electricity prices and has made natural gas-fired generation sources
even more attractive than wind, in many cases. Continued low natural gas prices could greatly constrain
demand for offshore wind farms in the United States. However, if natural gas prices were to rise
significantly—for example, due to increased liquefied natural gas (LNG) exports—the attractiveness of
offshore wind as an electricity generation source in the United States could increase.
4.2.4 Change in the Country’s Coal-Based Generation Capacity
In recent years, some electric utilities in the United States have announced plans to retire coal-fired
power plants or to convert them to natural gas. Navigant analysis reveals executed and planned
retirements through 2017 that exceed 37 GW. There are multiple factors involved in these retirement
decisions. Many of the United States’ coal-fired power plants are over 50 years old and expensive to
continue to operate and maintain. Complying with environmental requirements, such as the U.S.
Environmental Protection Agency’s (EPA’s) mercury and air toxics standards and proposed carbon
dioxide emissions limits, can also be costly. While the reduction in generation capacity created through
coal plant retirements will certainly not be filled entirely by a variable-output resource such as wind,
Continued coal plant retirements could play a role in increasing the demand for offshore wind plants in
the United States.
Offshore Wind Market and Economic Analysis Page 92 Document Number DE-EE0005360
4.3 Oil and Gas
4.3.1 Change in Level of Offshore Oil and Gas Development
Many of the initial installation vessels used in the offshore wind sector were retrofitted from the offshore
oil and gas sector. While certain shipbuilders are designing and building custom vessels for offshore
wind development, it can still be economical in some markets to upgrade vessels from the oil and gas
sector. An increase in offshore oil and gas activity could limit the availability and/or increase the cost of
these vessels for use in wind applications, as they may be returned to service in the oil and gas sector.
Indeed, Seajacks, a vessel operator, indicates on its website that its “self-propelled vessels are suitable for
installation and maintenance of offshore wind turbines, and are also able to perform maintenance work
on offshore oil and gas platforms.”48 Another potential issue is that the availability of laydown area and
cranes at key maritime ports could be constrained by offshore oil and gas activity. This issue, however, is
not expected to be as significant in the North and Mid-Atlantic as it is in the North Sea.
4.4 Construction
4.4.1 Change in Level of Construction Activity Using Similar Types of Equipment and/or Raw
Materials as Offshore Wind
The construction sector and the offshore wind sector use many of the same types of equipment and raw
materials. Construction projects such as roads, bridges, buildings, and sports stadiums require
equipment such as tall cranes and materials such as concrete and steel. Cranes are needed to lift wind
turbine tower segments and foundations and to preassemble rotors onshore. Wind turbine towers
require significant quantities of steel, while foundations may require concrete and/or steel. Since towers
represent 7-8 percent of the cost of an offshore wind farm and the foundations and substructures
represent 22-25 percent (Navigant 2012), the level of construction activity in the United States outside of
the offshore wind sector could impact the price of offshore wind power. Figure 4-4 shows the evolution
of commodity prices since 2002, which is a trend of generally increasing (and volatile in the case of steel)
prices.
48 http://www.seajacks.com/who_we_are.php
Offshore Wind Market and Economic Analysis Page 93 Document Number DE-EE0005360
Figure 4-4. Producer Price Index for Selected Commodities (2003-2012)
Base Year (100) = 1982
Source: United States Department of Labor, Bureau of Labor Statistics
4.5 Manufacturing
4.5.1 Change in Manufacturing of Products That Utilize Similar Types of Raw Materials as
Offshore Wind
The manufacturing sector similarly uses many of the same raw materials as offshore wind. The
manufacture of automobiles, heavy equipment, and appliances, for example, requires significant
amounts of steel, a material used in wind turbine towers and offshore foundations. Manufacturing
sectors such as aerospace, automotive, and marine vessels use composite materials similar to those used
in wind turbine blades. Finally, rare earth materials such as neodymium are used in applications such as
the permanent magnets that are used in certain types of electric motors and electrical generators,
including those in many direct drive wind turbine generators.
The DOE49 estimates that supply situation for rare earth oxides of neodymium and dysprosium will be
“critical” not only over the short term (2010-2015) but also over the medium term (2015-2025). The
supply risk for praseodymium was characterized as “not critical”. Criticality matrices from this report
are shown in Figure 4-5.
49 U.S. Department of Energy. Critical Materials Strategy. December 2010.
Offshore Wind Market and Economic Analysis Page 94 Document Number DE-EE0005360
Figure 4-5. Rare Earth Criticality Matrices
Sources: U.S. Department of Energy, Navigant
A 2012 report from the Massachusetts Institute of Technology’s Materials Systems Laboratory agrees
that neodymium and dysprosium will face supply challenges in the coming years.50
If the supply situation for rare earth metals remains tight and prices rise, so could the cost of offshore
wind production.
4.6 Telecommunications
4.6.1 Change in Demand for Subsea Cable-Laying Vessels
The specialized vessels that are appropriate for subsea cable-laying are relatively few in supply and high
in demand (BTM 2012). Not only are these vessels in high demand in Europe for offshore wind projects;
many of them are also used to lay subsea cable for the telecommunications industry. An increase in
deployment of subsea cables by global telecommunications companies could increase the development
costs of offshore wind farms.
50 Massachusetts Institute of Technology Materials Systems Laboratory. Evaluating Rare Earth Element Availability:
A Case with Revolutionary Demand from Clean Technologies. February 2012.
Offshore Wind Market and Economic Analysis Page 95 Document Number DE-EE0005360
4.7 Financial
4.7.1 Change in the Cost of Capital
Navigant estimates that construction financing costs could represent up to 12 percent of the total capital
costs of a 500-MW offshore wind farm in the United States (Navigant 2012). As a result, changes in the
cost of capital can have a significant impact on the cost and price of offshore wind power. An increase in
overall economic activity in the country would increase the demand for and therefore the cost of capital.
Offshore wind projects would have to compete with other infrastructure projects to secure the capital
necessary for development. While interest rates have been very low in recent years, the federal funds
rate was above 5 percent as recently as 2007 (see Figure 4-6).
Figure 4-6. Federal Funds Effective Rate (%): January 2000 – July 2013
Source: U.S. Federal Reserve
Offshore Wind Market and Economic Analysis Page 96 Document Number DE-EE0005360
5. Conclusion
The development of a comprehensive annual market report is an important step for the U.S. offshore
wind industry for two reasons. First, market assessments, especially those produced for government
agencies, provide stakeholders with a trusted data source. Second, the production of a comprehensive
assessment covering technical, regulatory, financial, economic development, and workforce issues will
annually inform the creation of policy to remove barriers facing the U.S. offshore wind industry.
This report provides readers with a foundation of information to guide U.S. offshore wind energy
development. As discussed in this report, significant technological advances are already unfolding
within the offshore wind industry, but more could be accomplished to direct needed improvements to
further reduce offshore wind costs and to stimulate needed infrastructure development. Policy examples
from Europe have shown that proper policy designs can stimulate offshore wind markets. Although
current U.S. offshore wind employment levels and investment are modest, employment could be
between 150 and 590 FTEs, and current investment could be between $21 million and $159 million. As
this report is updated and published annually, the Navigant Consortium hopes that the information
provided will prove to be a valuable resource for manufacturers, policymakers, developers, and
regulatory agencies to move the market toward a high-growth scenario for the offshore wind industry.
The survey, interviews, and workshops that provided important inputs to this report content will be
repeated each year as part of the annual data collection and dissemination process. The Navigant
Consortium appreciates the input and cooperation that participants have provided and looks forward to
similar involvement in future installments of this report.
Offshore Wind Market and Economic Analysis Page 97 Document Number DE-EE0005360
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Appendix A. Potential Barriers to Offshore Wind Development in the U.S.
A.1 Cost-Competitiveness of Offshore Wind Energy
Capital costs for the first generation of U.S. offshore wind projects are expected to be approximately
$6,000 per installed kW, compared with approximately $1,940 per installed kW for U.S. land-based wind
projects in 2012 (Wiser and Bollinger 2013). Offshore projects have higher capital costs for a number of
reasons, including turbine upgrades required for operation at sea, turbine foundations, balance-of-
system (BOS) infrastructure, the high cost of building at sea, and O&M warranty risk adjustments. These
costs remain high because the offshore wind industry is immature and learning curve effects have not
yet been fully realized. There are also a number of one-time costs incurred with the development of an
offshore wind project, such as vessels for turbine installation, port and harbor upgrades, manufacturing
facilities, and workforce training.
Offshore wind energy also has a higher LCOE than
comparable technologies. In addition to higher capital costs,
offshore wind has higher O&M costs as a result of its
location at sea. Higher permitting, transmission, and grid
integration costs contribute to this higher cost of energy,
which can be somewhat balanced by an improved wind
regime offshore.
Another economic benefit is the wholesale market price
suppression of peak-coincident offshore wind energy,
especially during the summer. Charles River Associates
projects price suppression to be over $7 billion for Cape
Wind over 25 years; the Massachusetts public utility
commission and Supreme Judicial Court recognized this
when approving the Cape Wind PPA.
Offshore wind has higher financing costs, due to the
heightened perceived risk. Since it is not yet a mature
industry, investors still perceive offshore wind as risky, due to regulatory and permitting issues,
construction and installation risk, and long-term reliability of energy production. As a result, insurance
and warranty premiums remain high. There are also extremely high risks to early-stage capital, given
the uncertainty around the price and availability of future off-take agreements for offshore wind.
A.2 Infrastructure Challenges
Offshore wind turbines are currently not manufactured in the United States. Domestic manufacturing
needs to be in place in the United States in order for the industry to fully develop. The absence of a
mature industry results in a lack of experienced labor for manufacturing, construction, and operations.
Workforce training must therefore be part of the upfront costs for U.S. projects.
The Jones Act
Section 27 of the Merchant Marine Act
of 1920, better known as the Jones Act,
requires that all goods transported by
water between U.S. ports be carried in
U.S.-flag ships. Once a wind farm
foundation is in place in U.S. federal
waters, the structure may be
considered a port and thus require
servicing by U.S. vessels. Currently,
the only existing specialist vessels
capable of offshore foundation and
turbine installation are mostly
European-owned and are in high
demand for European projects.
Offshore Wind Market and Economic Analysis Page 102 Document Number DE-EE0005360
The infrastructure required to install offshore wind farms, such as purpose-built ports and vessels, does
not currently exist in the United States. There is also insufficient capability for domestic operation and
maintenance. While turbine installation and maintenance vessels exist in other countries, legislation such
as the Jones Act may limit the ability of these foreign vessels to operate in U.S. waters. These issues also
apply to transmission infrastructure for offshore wind.
The absence of strong demand for offshore wind in the United States makes it difficult to overcome these
technical and infrastructure challenges. In order to develop the required infrastructure and technical
expertise, there must first be sufficient demand for offshore wind, and that is not expected in the near
term due to the high cost of offshore wind and the low cost of competing power generation resources,
such as natural gas.
A.3 Regulatory Challenges
A.3.1 Permitting
Offshore wind projects in the United States are facing new permitting processes. After issuing the Final
Rule governing offshore wind leasing on the Outer Continental Shelf (OCS) in 2009, Minerals
Management Service (MMS)—now BOEM—staff estimated that the lease process might require three
EISs and may extend seven to nine years. Secretary of the Interior Ken Salazar announced his Smart from
the Start Program initiative in 2010. One aspect of the initiative was the concept of preparing an EA,
which would evaluate the potential environmental impacts of commercial wind lease issuance,
associated site characterization surveys, and subsequent site assessment activities (i.e., installation and
operation of meteorological towers and buoys) prior to lease issuance, as opposed to preparing an EIS,
which would also analyze construction and operation of a wind facility prior to lease issuance.
Construction and operations plans proposing the installation of renewable energy generation facilities
would be subject to additional project specific environmental reviews. BOEM responded with a regional
Mid-Atlantic Environmental Assessment covering typical site assessment activities in New Jersey,
Delaware, Maryland, and Virginia, which should expedite review of site assessment plans off those state
coasts. This approach seeks to establish some certainty for developers and financiers.
A number of state and federal entities have authority over the siting, permitting, and installation of
offshore wind facilities. Cognizant federal agencies include BOEM, the U.S. Army Corps of Engineers
(USACE), the EPA, the FWS, the National Oceanic and Atmospheric Administration (NOAA), and
others. BOEM is preparing to sign a MOU with USACE to facilitate coordination of federal approvals of
offshore wind facilities and is negotiating MOUs with other federal agencies.
In March 2012, five Great Lakes states (Illinois, Michigan, Minnesota, New York, and Pennsylvania) and
ten federal agencies signed a bipartisan federal-state MOU to support efficient, expeditious, orderly, and
responsible review of proposed offshore wind energy projects in the Great Lakes. This consortium will
help ensure that efforts to meet America’s domestic energy demands in an environmentally responsible
manner through the use of excellent Great Lakes offshore wind resources occurs in an efficient and
effective manner that protects the health and safety of our environment and communities while
supporting vital economic growth.
Offshore Wind Market and Economic Analysis Page 103 Document Number DE-EE0005360
A.3.2 Environmental
Environmental concerns and public resistance present challenges to the industry. Regulatory agencies
must consider a range of environmental concerns related to offshore wind, including bird and bat
species, marine mammals, and pelagic and benthic species at risk, as well as potential impacts to water
quality. At this point, the environmental impacts of offshore wind in the United States are not well
understood. Several environmental organizations worked together with four offshore wind developers
to agree on survey vessel protocol to protect endangered whales during site assessment activities.51
Cultural resources, such as historic preservation sites and tribal resources, must also be considered. In
addition, public opposition may arise, especially with offshore wind sites near the shore that could
impact viewsheds, environmental resources, and competing human uses such as fishing.
51 “Proposed Mitigation Measures to Protect North Atlantic Right Whales from Site Assessment and
Characterization Activities of Offshore Wind Energy Development in the Mid-Atlantic Wind Energy Areas,” Letter
to BOEM, December 12, 2012.
Offshore Wind Market and Economic Analysis Page 104 Document Number DE-EE0005360
Appendix B. Offshore Wind Policies in Selected U.S. States
This appendix includes details on offshore wind policies and related activities in selected U.S. states. The
categories of policies to address cost competitiveness and site selection and leasing are included. A
summary of policies that address cost competitiveness is provided in tabular form in Section 2.3.2.
B.1 California
B.1.1 Infrastructure Policies
California has designated specific areas for land-based wind development to provide a level of certainty
for transmission development. California started its Renewable Energy Transmission Initiative (RETI) in
2007. The purpose of RETI is to engage the state’s renewable energy generation and transmission to
participate in a collaborative process to facilitate the designation of transmission corridors and the siting
and permitting for renewable energy generation and transmission projects.
The main components of RETI are as follows:
» Identifying CREZ with sufficient energy resource densities to justify building transmission lines
to them
» Ranking CREZ on the basis of environmental impacts, the certainty and schedule of project
development, and the cost and value to California consumers
» Developing conceptual transmission plans to the highest-ranking CREZ
» Supporting the California Independent System Operator (California ISO), investor-owned
utilities (IOUs), and publicly owned utilities (POUs) in developing detailed plans of service for
commercially viable transmission projects
» Providing detailed costs and benefit analyses to help establish the basis for regulatory approvals
of specific transmission projects52
In California, developers pay an initial deposit for ratepayer-subsidized transmission development and
then later pay the balance of the total transmission interconnection cost through long-term operating
revenues.
B.2 Delaware
B.2.1 Policies to Address Cost Competitiveness
In 2005, Delaware Senate Bill (S.B.) 74 established a RPS of 10 percent by 2019-2020. Two years later, S.B.
19 increased the target to 20 percent. In July 2010, the target was revised again by S.S. 1 for S.B. 119 to 25
percent by 2025-2026.53
52 http://www.energy.ca.gov/reti/RETI_FAQ.PDF
Offshore Wind Market and Economic Analysis Page 105 Document Number DE-EE0005360
While Delaware does not have a carve-out for offshore wind, in 2008, S.B. 328 set a 350 percent
multiplier for the REC value of offshore wind facilities sited on or before May 31, 2017.54
In 2007, an all-resource competitive bidding process was conducted in Delaware. Four state agencies,
including the Delaware Public Services Commission, the Office of Management and Budget, the State
Controller, and the Department of Natural Resources & Environmental Control, directed Delmarva
Power to negotiate a long-term PPA with the company then known as Bluewater Wind. The company,
which became a subsidiary of NRG Energy and was later known as NRG-Bluewater Wind, proposed to
build a 450 MW offshore wind farm approximately 12 miles from the coast.55
In December 2011, NRG-Bluewater Wind failed to make a substantial deposit to maintain the PPA. NRG
negotiated a lease for the site from BOEM after BOEM determined that there was no competitive interest
in the site. NRG is exploring a new development partner or sale of the lease and whoever pursues
development of the site will now have to obtain a new PPA. See
http://www.nrgenergy.com/nrgbluewaterwind/index.html for more details.
B.2.2 Site Selection and Leasing Policies
BOEM issued a Call for Information for Delaware projects and received two lease nominations. BOEM
subsequently determined that only one bidder was qualified and thus issued a Determination of No
Competitive Interest to NRG-Bluewater Wind on April 12, 2011. NRG Energy negotiated lease terms
with BOEM in December 2012. The lease terms provide a schedule requiring NRG to file a SAP and
COP within a maximum period of time.56
B.3 Illinois
B.3.1 Site Selection and Leasing Policies
On August 19, 2013, Illinois governor Pat Quinn signed the Lake Michigan Wind Energy Act, which
requires the Illinois Department of Natural Resources (DNR) to develop a detailed offshore wind energy
siting matrix for the public trust lands of Lake Michigan. The Act also authorizes the DNR to grant
offshore wind energy development site assessment permits and leases and to convert site assessment
leases to construction and operation leases and grants other rulemaking powers. Additionally, the Act
creates the Offshore Wind Energy Economic Development Policy Task Force, which is charged with
analyzing and evaluating policy and economic options to facilitate the development of offshore wind
energy and proposing an appropriate Illinois mechanism for purchasing and selling power from
offshore wind energy projects. This law is an outgrowth of a 2012 Lake Michigan Offshore Wind Energy
Advisory Report, which addressed the following issues:
53 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=DE06R&re=1&ee=1 54 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=DE06R&re=1&ee=1 55 http://www.usowc.org/states/de.html 56 See http://boem.gov/Renewable-Energy-Program/State-Activities/Delaware.aspx.
Offshore Wind Market and Economic Analysis Page 106 Document Number DE-EE0005360
» Appropriate criteria for the DNR to use to review applications for offshore wind development of
Lake Michigan lakebed leases
» Criteria for identifying areas that are favorable, acceptable, and unacceptable for offshore wind
development
» A recommended process for ensuring public engagement in the DNR’s process for leasing Lake
Michigan lakebed for offshore wind energy projects
» Options for how Illinois shall be compensated for Lake Michigan lakebed leasing
» A summary of the lessons learned from other domestic and international offshore wind
development experiences, including, but not limited to, those related to public policy,
regulatory, and siting concerns for offshore wind development
» Identification of local, state, and federal authorities with permitting, siting, or other approval
authority for wind power development in Lake Michigan
» Recommendations for needed state legislation and regulations governing offshore wind farm
development
B.4 Maine
B.4.1 Policies to Address Cost Competitiveness
In January 2013, the Maine PUC voted to support the Hywind Maine project’s pursuit of a long-term
PPA with Central Maine Power Company. However, the project was placed on hold in July 2013 after
new legislation created uncertainty regarding the state's prior approval of the project. That approval had
included the Maine PUC’s agreement for the project to receive ratepayer-funded subsidies after Statoil
submitted the only bid in the state’s competitive process. In late June, the Maine legislature passed a bill
that re-opened the bidding process for the ratepayer subsidies in order to allow the University of Maine
to submit a similar proposal for the Aqua Ventus project.
B.5 Maryland
B.5.1 Policies to Address Cost Competitiveness
Maryland has an RPS of 20 percent by 2022. The Maryland Offshore Wind Energy Act of 2013
established ORECs for up to 200 MW. The act addresses the cost of offshore wind by broadening the
cost-benefit analysis, including consideration of peak coincident price suppression and also capping the
impact on ratepayers at $1.50 per month.
Maryland issued an RFP in July 2012 to conduct initial marine surveys with state funds of the offshore
WEA that BOEM identified. Maryland plans to fund additional surveys with state funds to encourage
development of the WEA by private developers after the BOEM competitive auction process.
B.5.2 Site Selection and Leasing Policies
BOEM convened a Task Force and, in November 2010, issued a Request for Interest in offshore
development off the coast of Maryland. BOEM received several favorable responses and numerous
Offshore Wind Market and Economic Analysis Page 107 Document Number DE-EE0005360
comments on environmental concerns. In February 2012, BOEM issued a Call for Information for a
reduced WEA of just a few lease blocks and received ten lease nominations. BOEM has reduced the
WEA to 9 lease blocks to reduce conflicts with shipping and other constraints.57
B.6 Massachusetts
B.6.1 Policies to Address Cost Competitiveness
The Massachusetts Department of Energy Resources (DOER) has set an RPS for new renewables of 15
percent by 2020. The RPS increases by 1 percent each year thereafter with no stated expiration date.
There is no carve-out or REC multiplier for offshore wind.58 Governor Deval Patrick has set a separate
goal of developing 2,000 MW of offshore wind energy to help achieve the RPS requirements.
In 2008, the governor signed the Green Communities Act, which authorized distribution utilities to sign
PPAs with renewable energy developers. The Act, as amended, requires each electric distribution
company to conduct two solicitations within five years and sign PPAs for 7 percent of its load with
renewable energy generators.
The Massachusetts Department of Public Utilities (DPU) has approved a 15-year PPA between the
developers of the Cape Wind project and National Grid for half of the project’s output. The PPA would
start in 2013 (or later, since the project is delayed) at $0.187/kWh, with a 3.5 percent annual increase. The
DPU concluded that the contract is cost-effective because its benefits well exceed its costs. It also found
that approving the PPA is in the public interest, because no other renewable resource in the region
matches Cape Wind in terms of size, proximity to large electricity load, capacity factor, and advanced
stage of permitting, and because its bill impacts are in the range of only 1 to 2 percent.
The contract allows for upward and downward price adjustments based on a variety of contingencies. If
Cape Wind is unable to tap certain federal subsidies, the price would go up, but under other
circumstances the prices could go down, to the benefit of ratepayers. Specifically, should debt financing
costs be reduced as a result of a DOE loan guarantee, 75 percent of the savings would be passed along to
customers in lower rates. Similarly, if actual project costs, as verified by an independent audit, fall to
such an extent that the developer’s rate of return on debt and equity exceeds 10.75 percent, the contract
price of electricity will be reduced to give ratepayers 60 percent of the benefit of the lower costs; if actual
project costs are higher than anticipated and reduce this rate of return, the developer absorbs those
losses without impact on rates paid by consumers. This mechanism in the contract assures that the
developers of the project will not reap windfall profits.
The order concluded that the contract met the DPU’s standard for long-term contracts under Section 83
of the Green Communities Act, as well as the DPU’s standard for the public interest. In terms of cost-
effectiveness, the DPU concluded that the costs would be outweighed by the benefits provided by the
contract, namely assisting National Grid and the Commonwealth to comply with the state’s renewable
57 See http://boem.gov/Renewable-Energy-Program/State-Activities/Maryland.aspx. 58 http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=MA05R&re=1&ee=1
Offshore Wind Market and Economic Analysis Page 108 Document Number DE-EE0005360
energy and greenhouse gas emissions reduction requirements; providing National Grid the option to
extend the contract beyond 15 years at a price that covers the remaining costs of operating the facility
plus a reasonable rate of return; enhancing electricity reliability in the state; moderating system peak
load; and creating additional employment. The DPU observed that wind data show that Cape Wind’s
capacity factor would have averaged an impressive 76 percent during the region’s top ten historic peak
hours. It concluded further that the project will create an average of 162 jobs per year for the 15 years of
the contract—but many more than that during the two-plus-year construction period.
In terms of the public interest, the DPU found that the Cape Wind project offers “unique benefits relative
to the other renewable resources available.” In addition, the DPU found that the contract price was
reasonable for offshore wind, which the Department determined to be needed to meet state renewable
energy and greenhouse gas requirements. The bill impacts that could occur as a result of the contract
“are small relative to the volatility that electric customers regularly experience due to the fluctuations in
wholesale electricity prices, and the contract will mitigate that volatility.”59
The Massachusetts Supreme Judicial Court has upheld this contract on appeal, ruling that the DPU
reasonably determined the PPA was cost-effective, based on the administrative record based on non-
quantitative benefits of offshore wind moderating peak demand, suppressing wholesale generation
prices and the proximity of such large renewable generation to load centers.
As a condition of approving the merger between Northeast Utilities and NStar, the DPU required the
merged entity to purchase 27.5 percent of the output of the Cape Wind project.
Some additional lawsuits challenging environmental approvals of the project have been consolidated
and remain outstanding, but Cape Wind has conducted final geophysical and geotechnical surveys,
negotiating construction contracts, and planning to proceed with construction over the next couple of
years.
B.6.2 Site Selection and Leasing Policies
BOEM convened a Task Force and in March 2011 issued a Request for Interest in a 2,000 square mile area
south of Nantucket and Martha’s Vineyard. After extensive negotiations with commercial fishermen,
Massachusetts requested, and BOEM agreed, to cut the WEA approximately in half. On February 6, 2012,
BOEM issued a Call for Information and received ten lease nominations. On the same date, BOEM
issued a Notice of Intent to Prepare an Environmental Assessment with another opportunity for public
comment.60
B.7 Michigan
B.7.1 Site Selection and Leasing Policies
59 The 300-plus-page DPU order is located at http://www.env.state.ma.us/dpu/docs/electric/10-
54/112210dpufnord.pdf. 60 See http://boem.gov/Renewable-Energy-Program/State-Activities/Massachusetts.aspx.
Offshore Wind Market and Economic Analysis Page 109 Document Number DE-EE0005360
An October 2010 report of the Michigan Great Lakes Wind (GLOW) Council identified 13,339 square
miles that are considered most favorable to the sustainable development of offshore wind energy. Five
priority areas, known as wind resource areas (WRAs), were identified. The GLOW Council completed its
tasks and disbanded in 2010. The current governor is re-evaluating offshore wind development. Similar
re-evaluation scenarios are taking place in Ohio and Wisconsin, where political leadership and
associated renewable energy policy shifts occurred in 2010.
B.7.2 Infrastructure Policies
Michigan has designated specific areas for land-based wind development to provide a level of certainty
for transmission development. State legislation passed in 2008 (PA 295, Part 4) requires the Michigan
Public Service Commission to designate a primary wind energy resource zone and provides authority
for the designation of additional zones. On January 27, 2010, the Michigan Public Service Commission
(MPSC) issued a final order designating two Michigan regions as wind energy resource zones. The
primary wind energy resource zone is an area known as “Region 4”, which includes parts of Bay, Huron,
Saginaw, Sanilac, and Tuscola counties. A second area, known as “Region 1” has been identified by the
MPSC as an additional wind energy resource zone. Region 1 includes parts of Allegan County,
Michigan.
The MPSC based its decision on the findings of the Wind Energy Resource Zone Board, which submitted
its final report in 2009. Wind Energy Resource Zones are intended to expedite siting of the transmission
projects needed to move the wind energy onto the electric grid. The designation means that the MPSC
will facilitate the planning, siting, and construction of electricity transmission lines in order to facilitate
wind energy development in the area. Affected parties within the WREZ are given 21 days to reach
agreement on a voluntary cost allocation methodology for the transmission upgrade projects needed to
develop wind generation. If an agreement is reached, then the necessary actions will be taken by the
parties at the Midcontinent Independent Transmission System Operator, Inc. (MISO). If the parties are
unable to reach a cost allocation treatment amongst themselves, the MPSC will pursue another process
to resolve the matter.61
B.8 New Jersey
B.8.1 Policies to Address Cost Competitiveness
New Jersey has an RPS of 20.38 percent Class I and Class II renewables (which include wind) by
compliance year 2020-2021. The standard also includes an additional 5,316 GWh of solar-electric energy
by compliance year 2025-2026. New Jersey has established a carve-out in its RPS for offshore wind based
on offshore wind ORECs. However, a timeline has not been established for the OREC targets. The state’s
Board of Public Utilities (BPU) must define a percentage-based target to reach 1,100 MW of offshore
wind capacity. Projects seeking ORECs must present a price proposal for the credits as well as a
comprehensive net benefits analysis. The BPU issued initial rules in 2012 and plans to issue final rules in
2013.
61 http://www.michigan.gov/mpsc/0,4639,7-159-16400_17280-230708--,00.html)
Offshore Wind Market and Economic Analysis Page 110 Document Number DE-EE0005360
In July 2013, the BPU denied Fishermen’s Energy’s initial proposed settlement with the New Jersey
Division of Rate Counsel (DRC) involving the use of ORECs for its 25 MW project because the project
would not result in net economic benefits for the state. Fishermen’s Energy has submitted a second
proposed settlement to the BPU for review.
B.8.2 Site Selection and Leasing Policies
BOEM issued a Call for Information for New Jersey projects on April 20, 2011, and received 11 lease
nominations and 16 comments on environmental issues and competing uses. NREL is determining how
to divide the WEA into 3 to 5 blocks for the lease auction.62
B.9 New York
B.9.1 Policies to Address Cost Competitiveness
The New York Public Service Commission (PSC) has adopted an RPS of 29 percent by 2015. New York’s
RPS does not have a carve-out or a REC multiplier for offshore wind.
In 2005, the Long Island Power Authority (LIPA) conducted a competitive bid for offshore wind but
cancelled the process in 2008 due to high costs, which were projected to reach 29 cents/kWh.
In 2009, the New York Power Authority (NYPA) conducted a competitive bid for offshore wind in the
Great Lakes but ended the process in 2011 due to high costs.
NYPA, LIPA, and Consolidated Edison (NYPA Collaborative) filed an unsolicited request for a lease in
federal waters off Long Island for a 350-MW offshore wind project, possibly expandable to 700 MW.
BOEM issued a Request for Competitive Interest inviting other developers for this site to indicate their
interest and inviting public comments on environmental concerns. Fishermen’s Energy and EMI (Cape
Wind developer) expressed interest in developing the same site, which will result in a competitive
process for development of this WEA.
NYPA has issued an RFP to hire consultants to prepare a Site Assessment Plan to file after BOEM’s
Determination of No Competitive Interest. If NYPA obtains the lease, then NYPA plans to issue an RFP
for private project developers to bid to construct the wind farm. The NYPA Collaborative has conducted
the interconnection studies and plans to fund the interconnection and purchase the power from the wind
farm, which will provide the basis for the project financing.
The New York State Energy Research and Development Authority (NYSERDA) is planning to issue a
report on addressing the cost of offshore wind and has also commissioned an offshore wind policy
study.
62 See http://boem.gov/Renewable-Energy-Program/State-Activities/New-Jersey.aspx.
Offshore Wind Market and Economic Analysis Page 111 Document Number DE-EE0005360
B.9.2 Site Selection and Leasing Policies
In 2010, New York requested that BOEM establish a task force to facilitate intergovernmental
communications regarding OCS renewable energy activities and development. This task force is
planning to identify a WEA for lease by private developers in addition to the site that the NYPA
Collaborative identified.
B.10 Ohio
B.10.1 Site Selection and Leasing Policies
Ohio developed an Offshore Wind Turbine Placement Favorability Interactive Map Viewer to evaluate
sites. This tool is no longer publicly available, although some individual maps are available online.
Although Ohio does not have specific offshore wind siting rules, the existing Public Utilities
Commission certification process and coastal management and submerged lands leasing policies and
rules are being used to perform a regulatory review of the offshore wind demonstration project in Lake
Erie.
B.11 Rhode Island
B.11.1 Policies to Address Cost Competitiveness
In 2004, Rhode Island established an RPS of 16 percent by 2019. There is no carve-out or REC multiplier
for offshore wind.
In 2008, Rhode Island issued an RFP for an offshore wind project to produce 15 percent of the state’s
electricity demand and subsequently signed a Joint Development Agreement with Deepwater Wind. The
Rhode Island Public Utility Commission approved an initial 30-MW Pilot PPA for 24.4 cents/kWh, which
was eventually upheld by the Rhode Island Supreme Court. Rhode Island legislative advocates hope
that lessons learned from construction and operation of the pilot project will help reduce the cost of
constructing and operating a much larger wind farm of 500 to 1,000 MW with the same 6-MW wind
turbines.63
B.11.2 Site Selection and Leasing Policies
Rhode Island held a competitive bid process in 2008 to select a preferred developer for an offshore wind
farm off the coast of Rhode Island. Deepwater Wind LLC was selected as the winner and first negotiated
the contract to sell 30 MW of wind energy from a pilot wind farm in state waters off Block Island, Rhode
Island. BOEM issued a Request for Competitive Interest for the transmission route through 6 miles of
federal waters and then issued a Determination of No Competitive Interest. Deepwater has initiated
marine surveys, bird and bat surveys, with project permitting taking place in 2012 and construction
projected for 2015.
63 See http://offshorewind.net/OffshoreProjects/Rhode_Island.html.
Offshore Wind Market and Economic Analysis Page 112 Document Number DE-EE0005360
On August 18, 2011, BOEM issued a Call for Information and received nine lease nominations for a
larger offshore wind farm or farms on the OCS. On July 2, BOEM issued a Notice of Availability of a
draft EA for the WEA off Rhode Island and Massachusetts and scheduled two public hearings during
the public comment period.
In 2012, BOEM issued a Pre-Sale Notice of Lease Sale and a Final Notice of Lease Sale scheduling the
auction for July 31, 2013. Six developers qualified to bid in the auction. Deepwater Wind has been
designated the preliminary winner of both leases for the auction.64
B.12 Texas
B.12.1 Site Selection and Leasing Policies
The Texas General Land Office stipulates which areas are available for lease, the minimum MW size, and
the minimum royalty rates. Winning bidders are granted phased access, first given research rights, and
then construction and operation rights.
B.12.2 Infrastructure Policies
Texas has designated specific areas for land-based wind development to provide a level of certainty for
transmission development. In 2008, in response to legislative action, the Texas Public Utilities
Commission established five CREZ lines to be connected to load centers. Each of the five CREZ lines is to
be funded by all Texas ratepayers. The PUC called for $4.93 billion of CREZ transmission projects to be
constructed by seven transmission and distribution utilities and independent transmission development
companies. Transmission lines to each of the five CREZ areas, totaling 3,600 miles, are now projected to
cost $6.8 billion. The initiative will eventually facilitate the transmission of more than 18 GW of wind
power from west Texas and the Panhandle to the state’s highly populated areas.65
B.13 Virginia
B.13.1 Policies to Address Cost Competitiveness
Virginia is seeking to reduce the cost of offshore wind by having the local transmission system owner,
Dominion Energy (Virginia Power), conduct interconnection studies exploring a high-voltage offshore
submarine cable that could interconnect to a few wind farms.66
B.13.2 Site Selection and Leasing Policies
In February 2012, BOEM convened a Renewable Energy Task Force and issued a Call for Information
and Nominations, and received several nominations and comments. BOEM issued a Pre-Sale Notice and
64 See http://boem.gov/Renewable-Energy-Program/State-Activities/Rhode-Island.aspx. 65 http://www.texascrezprojects.com/ 66 See https://www.dom.com/news/2012/pdf/dominion_offshore_public_report_3-13-2012.pdf.
Offshore Wind Market and Economic Analysis Page 113 Document Number DE-EE0005360
Final Notice of Lease Sale, conducted an auction on September 4, 2013, and determined that Dominion
won the bidding for the entire WEA, subject to the anti-trust review.67
67 See http://boem.gov/Renewable-Energy-Program/State-Activities/Virginia.aspx
Offshore Wind Market and Economic Analysis Page 114 Document Number DE-EE0005360
Appendix C. Offshore Wind Policies in Selected European Countries
This appendix includes details on offshore wind policies and related activities in selected European
countries. The categories of policies to address cost competitiveness and site selection and leasing are
included. A summary of policies that address cost competitiveness is provided in tabular form in Section
2.3.3.
C.1 Denmark
C.1.1 Transmission
Offshore wind sites in Denmark are granted through the Danish Energy Agency’s (DEA’s) competitive
tender process. The Danish transmission system operator (TSO), Energinet.dk, is responsible for funding
and connecting the wind farms to the onshore grid. The TSO recovers the costs through the transmission
tariff collected from all electricity customers. The offshore wind farm and the offshore transmission
system development timelines set out in a call for tender are very challenging. However, project
termination or delays after tender award are subject to substantial penalties. This is one of the reasons
for there being only one bidder during the recent tendering process of the Anholt wind farm. Due to the
design of the tendering process, all projects are connected individually (i.e., point-to-point connections),
and there are no plans for inter-project transmission.
C.1.2 Ports
Ports in Denmark are owned by their respective municipalities. Any upgrades made to them are
approved by the municipality.
Denmark’s primary offshore wind port is the Port of Esbjerg. The port was once one of Denmark's
largest fishing ports but had faced a decline in recent decades. It was largely revitalized with the
installation of the Horns Rev 2 offshore wind project. Now, 65 percent of wind turbine exports pass
through the port.68 The Port of Esbjerg's board of directors has developed a strategic plan through 2019
that includes DKK 1 billion (USD 183 million) of investment for new infrastructure and reconfiguring the
port's facilities to create additional space for wind turbines in a new south harbor.69
C.1.3 Planning
In 1997, the Danish government published Denmark’s Action Plan for Offshore Wind. This plan
recognized the difficulty in finding sufficient suitable land-based sites for wind power to reach the
68http://www.esbjergkommune.dk/Admin/Public/DWSDownload.aspx?File=Files/Filer/Engelsk/New_Energy_Esbjer
g.pdf 69 http://www.investindk.com/News-and-events/News/2009/Offshore-wind-farms-mean-big-business-for-the-Port-
of-Esbjerg
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government’s long-term wind targets. The action plan identified five potential large-scale offshore
demonstration projects to be funded by a Public Service Obligation and built by public utilities.
Subsequently, the government opted to use a tender process for the development of two projects over
160 MW each. The wind farms Horns Rev and Nysted were eventually constructed, the former in 2002
and the latter in 2003. In the 1997 Action Plan, the government also outlined a centralized spatial
planning procedure for offshore wind in Denmark, identifying appropriate sites for development while
taking into account the potential environmental impacts.
In 2004, the DEA called for tenders for two 200-MW offshore wind farms, one at Horns Rev II and one at
Rødsand. The former was completed in 2009, while the latter was completed in 2010. In 2007, the Action
Plan was updated to reassess selected sites for offshore wind development. The updated plan identified
areas with favorable wind resources totaling 4,600 MW of potential capacity, corresponding to 50
percent of Danish electricity consumption.70
C.1.4 Concessions
The Danish government controls economic activity within
territorial waters, the Contiguous Zone, and the Exclusive
Economic Zone (EEZ). It can award offshore wind farm
concessions based on the Electricity Supply Act.
Developers can apply for an offshore license in two ways:
1. Based on the Danish government’s action plan for offshore wind development, the DEA invites
developers to bid on tenders for pre-specified sites.
2. Through the “open-door principle,” developers, at any time, can apply to develop a site. The
DEA assesses the site and, if it approves the project, grants development rights on a “first come,
first served” basis.71
Under the first procedure, the TSO performs and funds the transmission connection to shore. In the
second procedure, the developer must perform the grid connection. Cost recovery in this case is based
on the onshore rules. Projects following the “open-door principle” must also offer 20 percent ownership
to the local population, as is the case with land-based wind. Due to the lack of financial incentives, no
major commercial offshore project has been developed through the open-door route.
Six areas in Denmark have been identified for the offshore wind turbines at: Bornholm,
Smålandsfarvandet, Sejero Bay, Sæby, and the southern and northern areas of the Danish North Sea.
Feasibility studies for those areas have been initiated in January 2013 and prior notice of availability will
be published during 2013. Also in January 2013, the DEA published details of the tender process and the
provisional timetable for 1,500 MW of planned offshore wind power to be installed by 2020. The DEA
70 http://ec.europa.eu/ourcoast/download.cfm?fileID=983 71 http://www.ens.dk/en-US/supply/Renewable-energy/WindPower/offshore-Wind-Power/Procedures-and-permits-
for-offshore-wind-parks/Sider/Forside.aspx
The Danish government has a
centralized offshore wind spatial
planning procedure and awards
all offshore wind concessions.
Offshore Wind Market and Economic Analysis Page 116 Document Number DE-EE0005360
will initiate the tender process for two large offshore wind farms in 2013 (Horns Rev 3 and Krieger’s
Flat); however, the outcome of these tenders are not expected until 2015.72
C.1.5 Permitting
In Denmark, Chapter 3 of the Promotion of Renewable Energy Act indicates that the right to exploit
energy from water and wind within the territorial waters and the EEZ (up to 200 nautical miles) around
Denmark belongs to the Danish State. To establish an offshore wind project in Denmark, a developer
must obtain three licenses from the DEA. In terms of permitting, this agency serves as a "one-stop shop.”
It streamlines the project developer’s relationship with all of the offshore wind power stakeholders. The
Promotion of Renewable Energy Act mentions three licenses:
» License to carry out preliminary investigations
» License to establish the offshore wind turbines (only
given if preliminary investigations show that the project
is compatible with the relevant interests at sea)
» License to exploit wind power for a given number of
years and—in the case of wind farms of more than 25
MW—an approval for electricity production (given if
conditions in license to establish project are kept)
The DEA grants the three licenses for a specific project. If a given project can be expected to have an
environmental impact, the developer must perform an EIA. The specific regulations regarding EIAs for
offshore wind farms are described in Executive Order no. 815 of August 28, 2000.
C.1.6 Operations
In granting the building permits for Horns Rev and Nysted, Denmark’s first two large-scale (i.e., over
100 MW) wind farms, the DEA included an obligation for the project developers to carry out
comprehensive environmental monitoring programs. The DEA specified that these programs should
include detailed measurements of the environmental conditions before, during, and after construction.
Between 2001 and 2006, the program had a budget of DKK 84 million (approximately €11 million). The
program was financed as a public service obligation by electricity consumers. The monitoring work has
been coordinated by a group consisting of the Danish Forest and Nature Agency, the DEA, and the
projects’ developers, Vattenfall and DONG Energy. The results of the monitoring programs have been
evaluated by the International Advisory Panel of Experts on Marine Ecology (IAPEME).73
C.2 Germany
C.2.1 Transmission
72 http://www.offshorewind.biz/2013/01/31/denmark-to-launch-offshore-wind-tenders-timetable-now-ready/ 73http://193.88.185.141/Graphics/Publikationer/Havvindmoeller/Offshore_wind_farms_nov06/pdf/havvindm_korr_1
6nov_UK.pdf
The Danish Energy
Agency serves as a “one-
stop shop” for permitting.
Offshore Wind Market and Economic Analysis Page 117 Document Number DE-EE0005360
Two of the four German TSOs, TenneT and 50Hertz, are legally responsible, in their respective areas, for
planning, consenting, designing, building, and operating offshore transmission connections for all
offshore wind projects whose construction has begun prior to 2015. The TSOs incur investments in
offshore transmission assets and recover costs through transmission tariffs from the customers of all four
German TSOs.
The main challenge for offshore wind in 2012 was related to the grid, as TenneT, the TSO of the North
Sea area, has delayed construction of some of the export cables. The New German Energy Act (EnWG),
enacted on January 1, 2013, clarifies the compensation to which projects impacted by such delays are
entitled and how the funds can be raised for such purpose. This law is expected to unlock the situation
with TenneT. One direct result of the EnWG is a partnership between Mitsubishi and TenneT to invest in
four high-voltage cable projects, enabling connection to shore for an estimated 2.8 GW of offshore wind
farms.
C.2.2 Ports
C.2.2.1 Bremerhaven
The Federal State of Bremen has stated a goal of making Bremerhaven and Bremen into the leading
competence center and production area for offshore wind energy in northwest Germany.74 In 2002,
having recognized the emerging potential of offshore wind, the state government of Bremen decided to
invest €20 million on infrastructure upgrades and other incentives to help the port of Bremerhaven
benefit from the significant wind development already approved for in the German North Sea.75 The
state of Bremen was the first in northern Germany to implement such a policy for offshore wind.76 Policy
actions have included R&D and investment support schemes, as well as support for networks and
offshore-oriented infrastructure. The state’s policy reserved certain areas for offshore activities and
invested in port upgrades to accommodate these activities. Regional policymakers in Bremen strongly
recruited companies to relocate or set up their offshore activities in the state. In subsequent years,
AREVA (Multibrid), Repower, Powerblade, and Weser Wind established manufacturing facilities at the
port of Bremerhaven.
In January 2010, the Bremen Senate decided to commission a new heavy load, assembly, and
transshipment facility for the offshore industry at Bremerhaven beginning in 2014. The €200 million
facility will be called Offshore Terminal Bremerhaven (OTB). Government officials in Bremen have
stated the goal of developing Bremerhaven into the European center for offshore wind energy. The
construction, financing, and operation of the OTB will be conducted through a concession model. The
state government has selected Bremenports, which has managed the port infrastructure in Bremen and
Bremerhaven since 2002, to conduct a European-wide public tender for the project. The Bremen
74 http://www.power-
cluster.net/AboutPOWERcluster/ProjectPartners/BremerhavenEconomicDevelopmentCompany/tabid/624/Default.a
spx 75http://www.ewea.org/fileadmin/ewea_documents/documents/publications/WD/2009_september/Mini_Focus_Sept
ember_2009.pdf 76 http://druid8.sit.aau.dk/acc_papers/16vikj17dhdajdhyxsi7vymf446q.pdf
Offshore Wind Market and Economic Analysis Page 118 Document Number DE-EE0005360
government will grant the concession to the private investor who will recover its costs through user fees.
The investor will receive no government startup financing.77
C.2.2.2 Cuxhaven
The government of Lower Saxony, having identified the port and logistics needs of the offshore wind
energy in the region, is investing to upgrade the North Sea ports of Cuxhaven, Emden, and Brake.78 This
is in contrast to Bremen’s concession model that provides no public funds. To shift its focus to offshore
wind power, the port of Cuxhaven is investing €450 million to construct two new offshore terminals.79
This is in addition to storage and laydown areas already completed. Cuxport, the port operator in
Cuxhaven, has designed a heavy load berth to accommodate the extreme stresses from foundation
sections and generators. In addition, it is planning a new berth for ships of up to 290 meters in length.80
C.2.3 Planning
Given the lack of a standardized permitting process, the first few proposed offshore wind farms in
Germany had to define their own site investigations plan. More recently, however, the German
government has sought to develop a more government-led spatial planning system and regulatory
process for offshore wind. Still, the government has not yet implemented a centralized tender or bidding
process like those used in the United Kingdom and Denmark.81 In 2004, Germany’s Federal Spatial
Planning Act was expanded to the EEZ, which extends 200 nautical miles from the German shore.82 This
enabled the development of a spatial plan for offshore wind led by the permitting agency, the Federal
Maritime and Hydrographic Authority (BSH). The first draft of this spatial plan, released in 2008,
identified five priority areas (1,100 square kilometers) for offshore wind energy in the Germany North
and Baltic Seas. The draft plan was subsequently revised multiple times based on industry feedback.
Offshore wind farm development outside the priority areas is allowed, but it is subject to the results of
comprehensive environmental impact assessments.
C.2.4 Permitting
As mentioned in Section 2.5.3, in 2004, Germany’s Federal Spatial Planning Act was expanded to the
EEZ.83 This enabled the development of a spatial plan for offshore wind led by the permitting agency,
the BSH. The first draft of this spatial plan, released in 2008, identified five priority areas (1,100 square
77 http://www.bremenports.de/misc/filePush.php?id=571&name=Offshore_Broschuere_eng.pdf 78 http://www.pes.eu.com/assets/misc_new/pp52-55seaportspdf-202124705931.pdf 79 http://renewables.seenews.com/news/germanys-ports-in-cuxhaven-bremerhaven-bet-on-offshore-wind-power-
23354 80 http://www.cuxport.de/en/rhenus-cuxport/services/offshorebase-cuxhaven/ 81 http://www.northsearegion.eu/files/repository/20120320110429_PC-
StateoftheOffshoreWindIndustryinNorthernEurope-Lessonslearntinthefirstdecade.pdf 82 http://www.nve.no/Global/Energi/Havvind/Vedlegg/Offshore%20wind%20experiences%20-%20A%20bottom-
up%20review%20of%2016%20projects%20(Ocean%20Wind).pdf 83 http://www.nve.no/Global/Energi/Havvind/Vedlegg/Offshore%20wind%20experiences%20-%20A%20bottom-
up%20review%20of%2016%20projects%20(Ocean%20Wind).pdf
Offshore Wind Market and Economic Analysis Page 119 Document Number DE-EE0005360
kilometers) for offshore wind energy in the German North and Baltic Seas. The draft plan was
subsequently revised multiple times based on industry feedback. Offshore wind farm development
outside the priority areas is allowed but is subject to the results of comprehensive EIAs.
In Germany, permits for offshore wind farms are allocated through an open-door procedure. The first
candidate to submit a proposal for a project that meets all of the BSH’s stated criteria is given priority to
develop the site. The principal component of the German regulatory procedure for offshore wind is
obtaining the permit from the BSH. The permit provides a developer with exclusive rights to a site. Once
the project is fully consented, the developer can submit an application for grid connection. Under
German law, an offer for grid connection and the purchase of the electricity generated from the wind
farm are mandatory. This last step has been the source of many delays; financial responsibility for these
delays has finally been clarified as a result of the EnWG legislation in January 2013.
C.2.5 Operations
In February 2007, the BSH published the third edition of the “Standard for Investigation of the Impacts
of Offshore Wind Turbines on the Marine Environment (StUK3).”84
In Germany, the approval holder for an offshore wind farm is responsible for conducting the baseline
assessment, as well as assessments during the construction and operational phase. Monitoring data must
be submitted annually to the approval authority. The monitoring data must include the status prior to
construction, as well as any change during and subsequent to construction.
As part of Alpha Ventus (RAVE), Germany’s first offshore wind farm, the Federal Ministry for the
Environment, Nature Conservation, and Nuclear Safety (BMU) initiated and financed the research at
RAVE project. The BMU has allocated €50 million for the initiative. The initiative encompasses
approximately 25 research projects, some of which are focused on the interdependency of environmental
and technological impacts of offshore wind energy generation. Fraunhofer IWES coordinates the
initiative.85
C.3 The Netherlands
C.3.1 Transmission
In 2010, the Dutch government approved a proposal to make TenneT, the Dutch TSO, responsible for the
construction and management of the country’s offshore transmission grid.86
Currently, offshore wind developers in the Netherlands are responsible for incurring offshore
transmission system costs. The TSO bears the costs for reinforcements to the onshore transmission
84 http://www.bsh.de/en/Products/Books/Standard/7003eng.pdf 85 http://www.iwes.fraunhofer.de/en/press_media/overview/2012/alpha-ventus--research-and-industry-present-
common-achievements.html 86 http://www.tennet.org/english/images/100552%20TEN%20Offshorebroch%20%20EN_tcm43-19468.pdf
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system and recovers them through transmission tariffs collected from all electricity customers. However,
due to growth in the Dutch offshore market, there are calls to change this in the near future.
In early 2011, the EIB announced that it would provide €450 million in loans to TenneT to complete the
380kV Randstad transmission ring between The Hague and Rotterdam.87 The transmission cable would
enable the connection of offshore wind farms.
TenneT and the Danish TSO, Energinet.dk, are developing an undersea HVDC interconnector between
the two countries’ electricity grids. The project is called the COBRAcable. The proposed connection
would have a capacity of approximately 700 MW and would be around 275 kilometers in length. The
project incorporates the possibility of interconnecting offshore wind farms.88
C.3.2 Planning
The Dutch Ministry of Transport, Public Works and Water Management (MTPW) is the agency
authorized to issue the final site approval and permits for offshore wind projects off the Dutch coast. The
MTPW is now part of the Ministry of Infrastructure and Environment. The clear responsibilities and
procedures administered by this single agency will help to increase developments, as they reduce the
developer’s risks at an early stage in the project.
An Integrated Management Plan for the Netherlands Economic Zone in the North Sea in 2015 introduces
an integrated assessment framework for all activities requiring a permit. One of the key motivators for
this plan is the need to plan for offshore wind energy. Specific zones have been identified where future
offshore wind development should be concentrated. Specific site locations and delivery schedules are
determined by developers in their consent applications.
Dutch Round 2 consisted of 12 projects developed by six consortia who were awarded the right to tender
for 950 MW of subsidies. Neither government nor industry is satisfied with the planning and
organization of the Dutch Round 2, and final decisions on how to organize Round 3 have not been made.
Current plans are that the Ministry of Transport and Waterworks may reserve four large areas totaling
about 1,000 square kilometers for offshore wind. Consortia may then be asked to tender for wind
concessions in those areas, together with earmarked financial support. Selection should then be based
upon financial strength of the consortia, their plans, and their track record, as in the U.K. system.
C.3.3 Concessions
The rights for development are granted through a competitive tendering process. To take part in this
tendering process, the developer has to obtain a planning consent for the site. The winning bidders
receive the Stimulation of Sustainable Energy Production (SDE) tariff. To date, two tendering rounds
87 http://www.eib.org/projects/press/2011/2011-013-eib-supports-key-dutch-grid-project-to-connect-offshore-wind-
farms.htm 88 http://www.tennet.org/english/projects/Internationaalenoffshore/index.aspx
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have been held. The third and most significant round was planned, but it did not commence due to
political uncertainty and changes recently introduced to the FiT structure. Developers would have
looked to obtain consent in anticipation of the third tendering round, thus accounting for the number of
projects in the “approved” stage in the Netherlands.
In July 2011, the FiT system was changed, and the first call to tender was launched for renewable energy
generation under this new tariff SDE+. The SDE+ scheme is expected to be consumed by other renewable
technologies. This is because the tariff is not deemed to provide sufficient returns compared to the high
capital costs of offshore wind power. The economic crisis and the unsatisfactory tender results for the
previous OWF tender rounds, including several objections and procedures in court, have reduced
interest in offshore wind development and have resulted in new government strategies to reach the 2020
renewables targets.
In December 2008, the Dutch cabinet announced two locations in the North Sea where future offshore
wind farms can be developed, a 344-square-kilometer area located some 35 km off the coast of
Walcheren and a 1,170-square-kilometer area approximately 90 km off the coast of the Noord-Holland
province. In addition, two search areas were defined, one just off the coast of Noord-Holland and a
second area to the north of the Wadden Sea Islands. It is TenneT’s responsibility to prepare its
transmission grid in due time to accommodate these new offshore wind farms.
C.3.4 Permitting
As mentioned in Section 2.5.3, the OWEZ project in the Netherlands required consents from numerous
authorities, but the process is now managed by a single ministry. A clear procedure is critical to increase
developments, as it reduces the developer’s risks at an early stage in the project.
An Integrated Management Plan for the Netherlands Economic Zone in the North Sea in 2015 introduces
an integrated assessment framework for all activities requiring a permit. One of the key motivators for
this plan is the need to plan for offshore wind energy. Specific zones have been identified where future
offshore wind development should be concentrated.
C.3.5 Operations
In 2001, the Dutch government decided to support the OWEZ offshore wind energy farm demonstration
project. Prior to the project’s construction, the Dutch government called for baseline studies on ecology
and environmental factors. From 2002-2004, several consultancies conducted the baseline studies. After
the wind farm began operation in late 2006, the project developer, NoordzeeWind, continued to monitor
the project’s impact on the environment, as required in the tender agreement. NoordzeeWind conducted
this NSW-MEP Monitoring and Evaluation Programme in cooperation with leading research institutes.
The research program began in 2006 and continued until 2012.89 The Dutch government designated NL
Agency, Energy and Climate Change as the responsible party for overseeing the monitoring program on
behalf of the Dutch Ministry of Economic Affairs. NL Agency received the data and verified the
89 http://www.agentschapnl.nl/programmas-regelingen/ecology-and-environment
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consistency, integrity, validity, and plausibility of the data. Moreover, NL Agency was instructed to
store and distribute the data to third parties.90
C.4 United Kingdom
C.4.1 Transmission
The U.K. government’s offshore electricity transmission regulatory regime separates the generation from
the transmission. Ofgem regulates offshore transmission in the United Kingdom. In the country’s
offshore wind market, qualifying companies bid through a competitive tender process to become an
OFTO. The OFTOs will receive, via the TSO, National Grid, a 20-year stream of revenue payments. These
payments are determined according to the OFTO’s bid during the tender process. Under this regime,
offshore wind farm operators can choose to construct their own transmission connections or opt for the
OFTO to do so. This approach is unique, as most other European countries have directly tasked their
TSOs with construction and maintenance of offshore wind grid connections.
C.4.2 Ports
In 2007, the U.K. government conducted a review of national port policy. The government
recommended that the country’s major ports, most of which are privately owned and operated, produce
master plans.
The Planning Act 2008 was enacted to speed up the approval process for new nationally significant
infrastructure projects (NSIPs) in various economic sectors. National Policy Statements (NPSs) were
developed for 12 infrastructure sectors, one of which was ports.
In 2008, the DECC commissioned an independent study by BVG Associates entitled U.K. Ports for the
Offshore Wind Industry: Time to Act.91 The findings of the report contributed to the Department for
Transport’s NPS for ports. The NPS on ports was published in October 2011 and presents the
government’s conclusions regarding the need for new port infrastructure.92 The statement considers the
current role of ports in the country’s economy, the ports’ forecasted future demand, and the options for
meeting future needs. The NPS provides decision-makers with the approach they should use to evaluate
port development proposals.
In October 2010, the United Kingdom launched its first National Infrastructure Plan (NIP).93 Whereas the
NPS focus more on infrastructure planning, the NIP focuses on investment in infrastructure. The scope
of the sectors covered in the NIP is also greater than that of the NPSs.
90 http://www.agentschapnl.nl/programmas-regelingen/monitoring-and-evaluation-windpark-egmond-aan-zee 91 www.berr.gov.uk/files/file49871.pdf 92 http://assets.dft.gov.uk/publications/national-policy-statement-for-ports/111018-ports-nps-for-das.pdf 93 http://www.hm-treasury.gov.uk/d/nationalinfrastructureplan251010.pdf
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In October 2010, to support the achievement of its renewable energy targets for 2020, the United
Kingdom’s DECC and The Crown Estate (TCE) announced a £60 million investment to establish world-
class offshore wind manufacturing at port sites.94 On publication of its country’s first NIP, Prime
Minister David Cameron said, “We need thousands of offshore turbines in the next decade and beyond
yet neither the factories nor these large port sites currently exist. And that, understandably, is putting off
private investors. So we’re stepping in.” 95
The government has stated that it will accept applications from manufacturers or joint applications from
manufacturers and ports. However, the funding is not available for port-only applications. Applicants
apply for support under the Grants for Business Investment scheme, the United Kingdom’s national
business support scheme that supports sustainable investment and job creation in the Assisted Areas of
England. Assisted Areas are locations where regional economic development aid may be granted under
EU legislation. Funding commenced in April 2011 and is available through March 2015.
Shortly upon the announcement of this funding, turbine manufacturers Siemens, Gamesa, and Vestas
committed building portside manufacturing facilities in the United Kingdom. Siemens has committed to
produce its 6-MW offshore turbines at the Port of Hull in East Yorkshire,96 and Gamesa has chosen to
manufacture offshore turbines at the Port of Leith near Edinburgh.97 Assuming that a solid pipeline of
projects exists, Vestas will build its V164-7.0 MW turbines at the Port of Sheerness in Kent.98
The United Kingdom has had three rounds of offshore wind concessions, which are discussed in the
following three sections.
C.4.3 Round 1
In 2001, developers seeking sites for offshore wind projects initiated Round 1. The relatively quick
consenting process for some of the projects in this round, such as North Hoyle and Scroby Sands, reflects
the well-established consenting regime for electricity projects in place at the time. This demonstrated the
value and importance of a strong permitting framework for offshore wind. The incremental approach
used in Round 1—namely, smaller projects that were relatively
close to shore, delivered viable projects while also providing
significant experience and lessons learned for all stakeholders
(i.e., developers, contractors, and government).
C.4.4 Round 2
Whereas Round 1 was developer-led, Round 2, launched in
2003, was government-led. The U.K. government recognized
94 http://www.decc.gov.uk/en/content/cms/news/pn10_111/pn10_111.aspx 95 http://www.decc.gov.uk/en/content/cms/news/pn10_111/pn10_111.aspx 96 http://www.bbc.co.uk/news/uk-england-humber-17993593 97 http://www.guardian.co.uk/environment/2012/mar/23/gamesa-offshore-windfarm 98 http://www.vestas.com/en/media/news/news-display.aspx?action=3&NewsID=2662
The U.K. government
recognized the need to
streamline the consenting
process and created a “one-
stop shop” approach for
permitting.
Offshore Wind Market and Economic Analysis Page 124 Document Number DE-EE0005360
the importance of spatial planning and the need to streamline the consenting process. A “one-stop shop”
approach was created for permitting. For Round 2, the government commissioned Strategic
Environmental Assessments (SEAs) for three regions deemed attractive for offshore wind development,
the Thames Estuary, the Greater Wash, and the North West. In July 2003, TCE issued a formal Invitation
to Tender. Round 2 was designed to be significantly more ambitious than Round 1. No limit was placed
on size and no restriction to territorial waters was made. Fifteen of the 70 proposed projects were
granted leases.
In Round 2, TCE charged successful applicants a one-time fee based on the spatial area of their
respective sites. This ranged from £25,000 to £0.5M. Once operational, owners of Round 2 projects will be
required to make lease payments on the order of £0.88/MWh (indexed to inflation). The lease payments
are projected to be approximately 1 percent of gross power sales, including incentives. In July 2009, TCE
announced an offer to operators of Round 1 and Round 2 wind farms to extend their site leases to 50
years, affording developers greater certainty when considering life-extension and re-powering of their
projects. This move was also designed to instill greater confidence in the supply chain, addressing a
perceived gap in the project pipeline between Rounds 2 and 3.
C.4.5 Round 3
For Round 3, initiated in 2008, TCE, the seabed owner and manager, established a strategic spatial
planning process and identified nine Round 3 Zones in U.K. waters prior to running an extensive tender
process to identify credibility and financial robustness. Additionally, the U.K. government has
implemented a new Infrastructure Planning process for the permitting of offshore projects, providing an
improved, more efficient, and timelier consenting regime.
U.K. Round 3 exemplifies the importance and benefits of “zonation,” SEAs, and proactive spatial
planning. This framework approach, commencing in 2007 with a national Strategic Environmental
Assessment, concluded with an extensive marine spatial planning constraint mapping process
undertaken by TCE, with extensive consultation with stakeholders.
In U.K. Round 3, the advantages of zonation have been further extended by providing a collaborative
framework with TCE to develop the zones to maximize capacities. The principle of proactive spatial
planning has been taken a stage further in Round 3 through the ongoing technical and environmental
zone appraisal within the zone by the developer and TCE to utilize regional environmental assessment
tools to best locate projects according to environmental and permitting constraints. For Round 3, TCE
has granted exclusive development rights for nine zones. New Infrastructure Planning Commission will
be a one-stop permitting shop. Permits from local authorities will still have to be obtained.
In December 2007, the Department for Business, Enterprise and Regulatory Reform (BERR) announced
the commencement of an SEA, aimed at facilitating significant further expansion for offshore wind. A
target of 25 GW of additional capacity by 2020 was also announced. In January 2009, the U.K. Offshore
Energy SEA Environmental Report was issued for public consultation. The SEA indicates that the
preferred approach of DECC is to apply spatial and operational limitations to offshore wind
development zones, where required, to mitigate unacceptable environmental impacts, while supporting
Offshore Wind Market and Economic Analysis Page 125 Document Number DE-EE0005360
the overall use of the U.K. marine environment for achievement of the U.K. government’s energy policy
objectives.
TCE has published a generic version of a Round 3 pro forma leasing agreement; however, the specifics of
individual agreements are negotiated on a project-by-project basis. The pro forma states that leases are
offered on an 80-year basis (as opposed to 50-year leases for Round One and Round Two projects). Once
awarded a site, developers pay a non-refundable Lease Premium of an amount agreed upon with TCE.
Rent from date of lease agreement to commissioning is a notional £500 per annum per leasing
agreement. Following wind farm commissioning, the rent payable is a factor of generated electricity.
The 2009 Marine and Coastal Access Act, together with the 2010 Marine (Scotland) Act and upcoming
Northern Ireland Marine Bill, have set up a maritime planning system for all U.K. waters. Suitable areas
for offshore wind development have been identified through SEAs.
C.4.6 Permitting
Whereas the U.K.’s Round 1 was developer-led, Round 2, launched in 2003, was government-led. The
U.K. government recognized the importance of spatial planning and the need to streamline the
consenting process. A “one-stop shop” approach was created for permitting. For Round 2, the
government commissioned SEAs for three regions deemed attractive for offshore wind development: the
Thames Estuary; the Greater Wash; and the North West.
For Round 3 initiated in 2008, TCE, the seabed owner and manager, established a strategic spatial
planning process and identified nine Round 3 Zones in U.K. waters, prior to running an extensive tender
process to identify credibility and financial robustness. Additionally, the U.K. government has
implemented a new Infrastructure Planning process for the permitting of offshore projects, providing an
improved, more efficient, and timelier consenting regime.
C.4.7 Operations
In the U.K., offshore wind farm license holders are responsible
for monitoring the environmental impacts of their facilities.
Licenses under the Food and Environment Protection Act 1985
(FEPA) are required for any construction activity within the
marine environment. The FEPA licensing process includes a
thorough assessment of the likely impacts of the offshore wind
farm on the marine environment and the need for measures to
mitigate impacts and/or plans for marine environmental
monitoring.
In the U.K., offshore wind
farm license holders are
responsible for monitoring
the environmental impacts of
their facilities.
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In 2010, the Centre for Environment, Fisheries & Aquaculture Science (Cefas), with support from FEPA
and the Sea Mammal Research Unit (SMRU), conducted a study entitled “Strategic Review of Offshore
Wind Farm Monitoring Data Associated with FEPA Licence Conditions.”99 The report concluded the
following:
» It is vital to have clearer objectives within license conditions to ensure the developer knows why
and what monitoring is required
» It is important to incorporate datasets from national or even international monitoring programs
to utilize all available data
» There is a need to develop novel techniques to assess the issues identified in the Environmental
Statements
» Few conditions can be removed from licenses
» License conditions need to better reflect current scientific understanding and need to be more
explicit in their wording to aid enforcement
» More work is required within monitoring reports to assess interactions between different
receptors
» All topic areas stressed the need to have a standardization of survey and analytical
methodologies wherever possible to aid in future comparison and assessment
99 http://cefas.defra.gov.uk/media/393490/strategic-review-of-offshore-wind-farm-monitoring-version-final-19-
august-2010-sir.pdf